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1. Depreciation: Rental Property Tax DeductionDepreciation is a rental property tax deduction for the hypothetical wear and tear on your building as if it were an expense. Even though you may not be encountering costs to cover actual maintenance expenses, accounting principles allow you to take advantage of the eventual costs through depreciation.Determining what the depreciation figure is — and keeping proper records over time — is vital, and you should turn to your certified public account (CPA) or tax professional for assistance. Generally, you can depreciate your rental property value minus the cost of land evenly over 27.5 years, known as straight-line depreciation.Depreciation Example for Rental PropertyWe’re going to illustrate a straight line depreciation example that pertains to a rental property.Let’s assume the following:The combined value of the land and the building is $300,000The land is valued at $150,000The depreciation time frame according to the IRS is 27.5 yearsThe property is classified as a residential property. Some portions of commercial property improvements can be depreciated over 15 years.To figure out the depreciation, you first subtract the land value from the combined value of the land and building. Then you divide the building value by 27.5 years to get the amount of yearly depreciation.$300,000 – $150,000 = $150,000$150,000/27.5 = $5,454.54 depreciation per year$5,454.54 is the annual amount you can deduct when filing your rental property taxes. You will do this each year to assess the current home value and the associated annual depreciation.2. Mortgage Interest Payments: Rental Property Tax DeductionsInterest on a rental property can take several forms and may be one of a landlord’s biggest tax benefits of rental property. Mortgage interest, points, loan origination fees, interest on credit lines and, in some cases, interest from credit cards used for property-related expenses, may all be deductible.When you make a loan payment on your rental property, there are two components to that payment. There is a portion going to the principal and a portion going to an interest expense. You can see this by looking at your monthly statement. Unfortunately, you can’t deduct the principal portion of your payment. However, you can deduct the interest portion.For example, let’s say you have a mortgage or other loan related to the property with a monthly payment of $1,000. Let’s assume $200 is applied to principal, meaning that $800 is interest. Only the $800 is deductible as an expense. Multiply this interest by 12, and you find your annual interest deduction of $9,600. You can keep track of mortgage interest paid, with property management software.Mortgage InterestSince the main loans on a rental property are likely mortgages, this is the first interest figure to consider. You can also deduct loan points as a form of prepaid interest. Prior to the 2018 Tax Cuts and Jobs Act, you could deduct interest on home equity lines of credit (HELOC), but now there are restrictions.Points & Loan Origination FeesWhen you obtained financing for your rental property, you probably paid loan origination fees and/or points. Both of those are deductible and can be treated as forms of interest. However, your down payment is not deductible.Interest on Unsecured Loans for the PropertyIf you’ve obtained financing in the form of an unsecured loan, specifically used for a given property, that interest may also be deductible. For example, you might have an unsecured loan for the replacement of a roof, that interest may be deductible.This is an area where you may want to engage the services of your accountant because deductibility for unsecured loans can be tricky ― particularly if the proceeds were used on more than one property or certain amounts used personally. Accurate accounting is vital.Interest on Credit Cards Used for the PropertyYou may have also used a credit card for the property and incurred some interest. An example is using a credit card to purchase a refrigerator for your rental property and paying for it over several months, resulting in interest charges. The interest stemming from that purchase would be deductible.Similar to the situation with unsecured loans, involve your tax professional or CPA if you are trying to deduct credit card interest because it can be tough to track properly.If you want more information on business credit cards, how they work, and who they’re right for, then check out our guide to the best small business credit cards of 2018.3. Fees & Tax Benefits of Rental PropertyReal estate investors receive rental property tax deductions — deducting related expenses is definitely one of them. Property taxes, licensing fees, and occupancy taxes are three of the most common forms of taxation for rental property, and they’re also deductible. You need to report expenses allocated for the rental property on a Schedule E.We will now discuss property taxes, licensing fees and other rental property taxes.Property TaxesVirtually every county or municipality in the country charges property taxes. In rural areas, the amount may be small, perhaps only a few hundred dollars. In some markets, property taxes can be quite high, sometimes up to six figures a year. Rental properties are typically taxed at a higher rate than primary residences.You can find your rental property tax rate at your county’s office of the assessor or recorder. Sometimes these offices have slightly different names, but you can Google your county and find property tax information on their site as well as a contact phone number. If you have a mortgage on the property, your lender will send you an escrow summary that shows property taxes paid as well.Licensing FeesMany states have licensing requirements for rental property. This refers to a license specifically for the property, not to be confused with a business license for your real estate business, which may be deductible. If you’ve had to obtain or renew a landlord or similar license for the property, that cost is deductible.Some municipalities require a vacation rental license for short-term rentals, which typically cost around $1,200 the first year and around $600 in subsequent years, depending on the property area and number of bedrooms. For additional information on short-term rentals, check out our guide to buying a vacation rental property.Occupancy Tax DeductionsSome states charge occupancy taxes on rental amounts, similar to sales tax. This is particularly the case in states where short-term rentals are common. Examples include Florida, which charges a “tourist tax” for rentals less than seven months and multiple areas throughout Arizona. If you are required to pay a tax on rental amounts, that expense is deductible. These taxes vary by state and, sometimes, vary by city, county, or even municipality.Download Your Free Rental Property Tax Deduction Worksheet4. Insurance: Rental Property Tax DeductionsAny form of insurance is considered an expense, hence tax deductible for the rental building. This includes basic hazard insurance and special perils insurance like flood or hurricane coverage as well as liability insurance.Typical types of rental property insurance include:Liability insuranceHazard and fire insuranceSewer backup insurance which can be added to your hazard policyFlood insurance which covers water coming from any source outside the home and is required by most mortgage companiesLoss of income insurance which can be added to your hazard policy and will cover you in the case of lost rental incomeInsurance specifically for a rental property is generally 15% to 20% more than a policy for an owner-occupied policy. The average annual premium on landlord insurance is about $822. This varies, depending on the size, cost, and location of the rental property. For more information, read our article on landlord insurance.Deducting Umbrella Liability Policies for Rental PropertiesIf you have other forms of insurance such as a landlord liability policy or umbrella liability policy that covers multiple properties, you will want to seek the counsel of your tax professional or CPA to determine how it should be deducted. One option is to prorate the cost among each property; another possibility may be to deduct it from the overall business entity.5. Utilities: Rental Property Tax DeductionsIf you have to pay for any utilities — gas, electric, or water — they are a deductible expense. If you pay for private trash removal and/or recycling service, those may be lumped in with utilities. In addition, if you pay for communication services like internet or cable/satellite TV for your rentals, those costs are also deductible as a utility expense.Deductions for various common utilities can be claimed on:Heating billsElectricityAir conditioningWaterSewerTrash & recyclingInternet, television & phone services6. Maintenance & Repair: Rental Property Tax DeductionsCosts to maintain, care for, and improve the property are deductible. However, there is a difference between how things like cleaning, maintenance, and repair are deducted vs how improvements are handled.Cleaning, Maintenance & RepairThese items are considered normal, ongoing items in the operating of the property. They are deductible as normal operating expenses. An example of maintenance might be replacing a few shingles lost to a storm. Normal wear and tear on a property can include replacing worn carpet or repainting rooms with faded paint from sunlight exposure.ImprovementsImprovements are considered long-term benefits to the property and are depreciated over several years. Some items may be depreciated over five years, others as long as 27.5 years. Using the roof example from above, if it’s the entire roof being replaced, that’s considered a capital improvement and must be depreciated over 27.5 years.Since the roof has been depreciated, you can’t expense the entire cost in one year. Instead, you would spread the cost out over 27.5 years. So, if the roof was $15,000, you should deduct the same amount each year, according to the IRS, in the straight line depreciation method. This means you would deduct $545.45 each year for 27.5 years.With improvements, it’s vital to involve your CPA or tax professional. It’s important to classify and compute things correctly, and the recordkeeping responsibility is rigorous.7. Advertising & Marketing: Tax Benefits of Rental PropertyThere are two main sources of marketing deductions for a rental property. They include advertising to find tenants to rent the property and lease-up commissions to pay real estate professionals or property managers to rent out the property. Both of which can be tax deductible. For more information on marketing, read our article about how to rent a house.AdvertisingAny amount you expend to advertise your building, its availability for tenants, or for anything else related to the property like trying to find an on-site manager or contractor are all deductible as normal operating expenses. This includes fees or subscriptions for websites like Zillow where you might list your property for rent.Tenant Placement & Lease-up CommissionsAn often overlooked marketing expense is the commission paid to a real estate agent or property management firm to either secure a new tenant or renew their lease. Because this is often one month’s rent or more, it’s a significant expense well worth recording.8. Homeowner Association Fees: Rental Property Tax DeductionIf your rental property is located in a community that charges any kind of homeowner association (HOA) fees, condo fees, planned unit development (PUD) fees, and so on, these are deductible expenses. The IRS considers then necessary to maintain the property. HOA fees vary depending on the location, amenities included and size of the unit but the average HOA fees for a single-family home are $200 to $300 per month.In addition, you may be able to deduct items required by your HOA. For example, some HOAs require expensive for rent signs that meet certain specifications. These sign expenses would generally be deductible.9. Auto & Travel: Rental Property Tax DeductionsTravel-related tax benefits of rental property are generally categorized in two ways: automobile-related travel expenses and other travel-related expenses. You can deduct the necessary expenses of traveling as long as the trip’s primary purpose pertains to your rental property.Auto ExpensesBusiness use of your car for your rental properties is deductible. If you have to drive to a property to show it, tackle repairs, or otherwise visit the property for a legitimate operational purpose, the mileage is deductible.Auto expenses can be deducted using the standard mileage method or the “actual” method. For 2019, the IRS set the rate at 58 cents per mile driven for business. The “actual” method uses the percentage of all actual vehicle expenses used for business. Both require you to keep the necessary records. To learn more details about mileage deduction, read our guide on standard mileage deduction.There are also apps for smartphones that make keeping the records very easy and convenient. You don’t have to write it down or wait until you’re in front of your computer to record your mileage. Instead, you can download the app on your smartphone and keep track of your mileage on the go. To learn more about these convenient smartphone apps check out our guide on the best mileage tracking apps.Additionally, you may have investment business mileage not attributable to individual properties but, to the business overall, that may also be deductible. Any business-related mileage like going to the office supply store or post office is deductible if documented properly.Rental Property Tax Deductions for Other Travel ExpensesAside from using your car, other travel expenses related to your rental property may be partially or totally deductible. For example, if you fly to a property in another state to clean out the building between tenants, that’s legitimately business-related. The airfare would be deductible as would hotel stays meals, rental cars, parking, and tolls.However, only the business portion of the trip is deductible; you have to prorate that portion, which is clearly business vs that which isn’t. In the above example, if you stayed a week, but only dealt with the property for two days, you can’t deduct all seven days’ worth of meals or hotel costs.To learn more about properly deducting travel related expenses check out our guide on deducting travel and entertainment expenses.10. Supplies: Rental Property Tax DeductionsThe supplies category is somewhat a miscellaneous one that can include anything from hardware to office supplies. Many supplies will be directly used on a given property and deductible to the property itself. An example might be driveway sealant if the can was used on just the one property.Other supplies might be applicable to several or all of your properties and deductible to the business as a whole. An example might be computer printer paper, which can’t be allocated to a single property but is used for anything related to the business.Typical supplies related to your rental property include:Printer ink, which can be expensive at an average of $13 per ouncePrinter paper, folders, binders, and receipt books to stay organizedMaintenance supplies like paint, spackle, primer, and brushesCleaning supplies like buckets, mops, vacuums, and cleaning solutionsBuilding supplies like sheetrock, nuts, bolts, and plywoodHardware including locks and keys, which can add up if you change them after each tenancy; locksmiths often charge upward of $125 to change locks11. Property Management: Tax Deduction for Rental PropertyProperty management can be performed in several ways. You may be handling it yourself, engaging a property management firm, or hiring a property manager. Each is handled differently from a tax standpoint. Property management fees generally range from 7% to 20% of the gross monthly rental income depending on the type of property.Tax Benefits of Rental Property You Manage YourselfWhether you can deduct any of your personal management depends on how you’ve structured your business. If your properties are owned by you personally like a sole proprietorship, it’s tricky to deduct the cost of your own management. The better you substantiate your active management, the more likely you’ll be able to demonstrate your active engagement.If you have an entity like an LLC or corporation, there may be the possibility of the company employing you as a property manager, which means your salary will be a deductible expense. In that case, you can deduct property management software for things like marketing your property and tenant screening.Tax Deductions If You Engage a Property Management FirmFees that you pay to a property management firm for their services are deductible. Be aware, however, that things like commissions for tenant placement should be noted as marketing and not management.Tax Deductions If You Hire a Property ManagerReal estate investors with large multi-unit properties or apartment buildings will often hire on-site property managers. Salaries and any benefits paid to these managers are fully deductible rental property expenses.12. Legal & Professional Fees: Rental Property Tax DeductionsProfessional services like accounting and legal work are deductible expenses. Generally, these will be applied overall to your real estate investment business. However, if there is work clearly applicable to certain properties, then the expenses are deductible for the properties themselves. These professionals are often able to identify additional tax benefits of rental property for investors.Some examples of professional and legal fees may include:Legal work to prepare LLC entityLegal review or preparation of lease documentsBookkeeping servicesTax filing preparationSources: Top 12 Rental Property Tax Deductions & Benefits 2019 [+ Free Worksheet]

Here are some simple strategies to get you started budgeting. The right system makes budgeting easier than you think… and the payoff makes it worthwhile.5 EASY STEPS TO CREATE A BUDGET STRATEGY THAT YOU’LL ACTUALLY USE!1. GET INTO THE MINDSETAre you revved up? What about your partner and your family? As you put together your spending and savings strategy, consider how you’ll bring your household on board.As you’re organizing your finances, think of how your partner can participate in the recordkeeping and goal-setting, and how you’ll frame the conversation with your household members. Don’t forget, you’re also setting a positive example for your kids, both in the present and for their future.2. CREATE A BUDGET BINDERTechnology makes a lot of things easy. File sharing applications, accounting software, cloud storage… it’s all great, and there’s definitely a place for it. I’ll even share some tech tips later on.But what I love about the binder system is that it’s handy. You don’t need to fire up your computer, figure out spreadsheets or software, and make sure you’ve backed up your files. Plus, you can grab your binder and sit down with your partner and family whenever you want to make notes and update your records.Trust me. It’s the path of least resistance. You’ll want to pick out a 2″-4″ binder on Amazon or at your local dollar store. You can even recycle one from last year’s school supplies.Download and print a monthly budget planner sheet.3. TRACK DOWN & ORGANIZE YOUR PAPERWORKFirst, gather your cardboard boxes or storage totes full of unopened bank statements, bills and loose receipts.I recommend using an out-of-the-way area where you can power through this part without distraction or feeling like you have to stuff everything back into a box halfway through the project. You can use as many binder divider sheets as you want, as long as they’re clearly labeled and they make sense to you:Utilities, insurance, rent receipts, loan and bank statements, etcetera. You’ll keep your paycheck stubs here, too. Keep your documents filed by date so they’re easy to find, but use a method you can realistically maintain. Save retail register receipts for last. For example, tally up your gas station receipts for each month, and put them in a medium-sized Manila envelope.The same goes for grocery receipts, which you’ll want to keep on hand to decide how to prioritize your food purchases. Stash your envelopes in an inside binder pocket, or punch holes along one side to insert into the binder rings.If you’re finding a lot of stuff from prior years, you’ll want to keep whatever applies to your tax returns. Otherwise, go ahead and get rid of it. While it’s useful to have historical data, you don’t want to go overboard.Have a big trash can ready for junk inserts, envelopes, and other discarded materials, and try to adhere to this rule: Only handle each financial document once. This means, as soon as you locate it, either put it in your binder or chuck it.4. START CRUNCHING NUMBERSIncome-Total your net income from all sources, and mark your paydays on your binder’s dedicated calendar.Fixed Expenses-Write down your recurring fixed monthly expenses: Utilities, insurance, mortgage, childcare, entertainment subscriptions, etc.Variable Expenses-Write down your monthly variable expenses: Groceries, entertainment, laundry, dry cleaning, pet grooming, gas.Annual Expenses-Total up quarterly or annual expenses such as routine (or unexpected) auto repairs and maintenance, carpet cleaning, gift giving, taxes, and personal travel; once you have a total for each category, divide them by 12.With rough numbers, you’ll see how your expenses compare to your income. Use my budget planner worksheet to organize expenses into different categories for a more detailed view.Can you see any glaringly obvious ways you can save some money? When you have the numbers in front of you, does it change the way you feel about certain purchases or spending habits?Now you can realistically earmark portions of your income for living expenses while making more careful decisions about how you spend your mad money.5. MAINTAIN MOMENTUMOnce you’ve organized your binder, experienced your wake-up call, and set up a budget, you’ll want to keep your binder where you can easily and quickly access it at home.Do your best to file away receipts at least once a week. Pick an evening when you can spend 15 to 20 minutes reviewing your budget and “catching up” on your filing.If you want to go wireless, you can take quick snapshots on your smartphone and organize your receipts anytime on a productivity application like Evernote, or use a portable, wireless document scanner to archive your receipts.Just be sure to have a sensible organizing system for your receipt images, and don’t forget to write down your spending data on your “hard copy” planning sheets.You’ll adapt your system to your own preferences, and you’ll round out your budgeting strategy as you learn more about—and improve—your spending habits.If you’re like me, you’ll find it useful to keep a scratch pad in your binder for money saving ideas, and you’ll definitely come up with your own tricks to make your binder (and your budget) work for you and your household.Don’t give up. You’re building a new habit, and according to research, it takes an average of two months to make it stick. You’ll be amazed by how quickly you’ll accumulate savings, and how you’ll find money to pay down your debt.If you have any questions let me know, I’m happy to help.

Here are some good college planning tools from Edmit:Cost of CollegeCollege Student Budget TemplateHere’s how to figure out the appropriate amount of student loans.Is the “Rule of Thumb,”“It is reasonable to take out student loans equal to your targeted starting salary,”A good guideline?Taking out student loans equal to your targeted starting salary is a very bad idea.I have written about this extensively on Quora. The short answer is to limit your student loans to HALF your targeted starting salary.Let’s look at the issue from two different perspectives, using an example of a $50,000 a year job.If your targeted job (upon graduation) has a starting salary of $50,000, is it reasonable to take out $50,000 in student loans?”The obvious answer to that question is a resounding, “NO!”Because you are gambling:That you will graduate. (Forty percent don’t.)That you will graduate with the projected, marketable major. (Multivariable calculus has turned many a presumptive engineer ($65K) into a high school math teacher ($40K).That you will graduate on budget, in the number of semesters estimated.That your targeted job is available. (Ask those who graduated into the headwinds of the Great Recession of 2008.)That you will be a successful candidate for that job. (Forty percent of college grads end up underemployed.)Now, do you understand why there is a student loan crisis? Teenagers don’t understand risk. (I admit, why parents don’t grasp this, is beyond me.)Let’s look at the problem from another angle.How great a salary do you need to support the monthly payments on $50,000 of student loans?Assuming you qualify, you would be able to borrow $27,000 over four years in Federal Direct Student Loans at very attractive interest rates. The balance, $23,000, would be in private loans with much higher rates.Let’s assume you are going to live in the Midwest (Ohio) where the cost of living is very reasonable.Your BudgetMonthly gross income=$4166Taxes=$766Student loan payment=$600 (Ouch! That’s more than 14% of your gross monthly income.)Apartment rent (700 sq ft)=$1000Auto expenses=$500Net monthly income=$1300You should be able to afford three homecooked meals a day, but I hope you weren’t planning on dining out a lot, dating, or expensive travel.You are still going to be living like a student. It is going to be tight. You’ll need to consider a roommate, or perhaps a side-gig.ConclusionsInstead of beginning your search for a suitable college by comparing the heights of their respective climbing walls, start with an analysis of “affordability.”Limit your student loans to HALF your targeted starting salary.With your parent’s help, prepare a four-year financial plan.You need to have a targeted job and starting salary, in order to intelligently plan for the student loans in that financial plan.NoteEdmit missed The American Opportunity Tax Credit in their “affordability worksheet. That could be worth as much as $10K.