Being a landlord can be costly. Whether you’re spending money on the home for renovations and upgrades or paying for emergency repairs, those dollar signs can really add up. Wouldn’t it be great if you could get some of that money back on your taxes? Good news: you just might be able to.

Landlords must distinguish repairs from renovations

One of the major factors that determines if a landlord can deduct certain expenses is to clarify if the cost is for repairs or for renovations. Repairs to investment properties make the property livable, whereas renovations improve the property’s state. The two are usually declared separately from each other on your tax return, and they are also deducted separately from ordinary income and expenses.

Is that a repair?

The Internal Revenue Service does allow landlords to take a first-year deduction on repairs. That’s why it’s important to distinguish between the two. Repairs are necessary due to damage. They put the property back to an acceptable rental condition i.e. the same condition that it was in prior to the damage. Repairs do not add to the value of a property or change its function, unlike renovations.

Landlords may prefer to declare home expenses as repairs because it helps restore or increase their cash flow. In plain English, fully declaring expenses for repairs in the current year helps landlords get some of their money back sooner than later.

Find out more information on how to maximize your home related tax deductions here.


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