Definition
Tax deductions reduce taxable rental income, including depreciation, mortgage interest, management fees, and operating costs. Deductions often create paper losses.
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Rental property tax deductions include depreciation, mortgage interest, property management fees, maintenance, insurance, and utilities. Depreciation is powerful deduction (~3.6% of building value annually). Deductions significantly reduce taxable income.
Pro Tip
Understand rental property tax deductions. They create tax-sheltered income.
Example
Property with $60,000 rental income has $40,000 deductions (depreciation, interest, expenses), reducing taxable income to $20,000