Operating Expenses
For tax purposes, you will figure your profit or loss each year from operating the rental property. Generally, you can virtually deduct all expenses incurred to operate the rental. The following is a list of potential operating expenses that are deductible:
- Advertising
- Cleaning & maintenance
- Bank charges – if a separate account is maintained.
- Insurance – fire, casualty and liability
- Utilities – gas, electricity, water, cable, etc.
- Services (1) – yard care, pool service, pest control, etc.
- Rental commissions
- Property management fees
- Mortgage interest – on debt to acquire or improve the rental.
- Property taxes
- Repairs – see repairs vs. improvements later.
- Local transportation expenses
- Homeowners or association dues
- Tax return preparation fees
- Depreciation allowance – see depreciation later.
(1)If any individual or company providing these services is paid $600 or more during the year, you are required to issue them a 1099MISC.
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