Deductions that flow to personal income

2 Replies

Hey guys - I work full time and I'm looking at buying my first rental, holding it within an LLC.

I know investment property mortgage interest can be a deduction against my personal income (even if the property isn't cashflowing, right?). But are there any other deductions that flow to my personal income?

IE: If I have office expenses, can I deduct them from my personal W-2 and lower my effective tax rate? Or will it only get applied to the profits of the property?

Your losses (assuming your property is not generating enough income to cover office expenses) can flow through to your tax return, lowering your effective tax rate. Please keep the receipts though because IRS doesn't like too much business losses. But unless you do it Donald Trump style you are probably fine. IRS has bigger fish to fry.

Owning a rental property is a business. The IRS allows expenses that are ordinary and necessary to be deducted. Of course the devil is in the details and there are lots of details when it comes to tax law. 

In general yes you can deduct office expenses related to your rental. You may also be able to use the home office deduction but that is a more complex question. Mileage to and from your rental can be deducted. Driving around to look for new properties is not deductible. Postage, parking, bank account charges, registrations, licenses, insurance, depreciation, and many other items are deductible if they are for management of the property. If the property loses money due to depreciation that loss may be limited depending on your income.

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