Two of the most significant deductions. You can deduct interest on mortgages used to acquire or improve investment properties, as well as the property taxes you pay annually. These apply to both fix-and-flip projects and long-term rentals.
The costs of running your investment property business are deductible. This includes repairs, maintenance, insurance, utilities, property management fees, and marketing costs to find tenants. Keeping meticulous records is key.
A powerful deduction for landlords. It allows you to write off the value of your rental building over 27.5 years. This is a non-cash expense that can significantly reduce your taxable income from the property.
A critical distinction for tax purposes is between a repair and a capital improvement. Understanding this difference affects how you deduct the expense.
| Capital Improvement | Repair |
|---|---|
| Adds value, prolongs life, or adapts the property to a new use (e.g., new roof, kitchen remodel). Must be capitalized and depreciated over time. | Maintains the property in its current condition (e.g., fixing a leaky faucet, patching drywall). Can be expensed and deducted in the year it was paid. |
For fix-and-flip investors, most rehab costs are considered capital improvements and are included in the property's cost basis, reducing the capital gain upon sale.
Common Deductible Expenses Checklist
Important Disclaimer
The information provided here is for educational purposes only and is not a substitute for professional tax advice. Tax laws are complex and change frequently. Harvey Capital Funding is a lender, not a tax advisor. We strongly recommend consulting with a qualified tax professional or CPA to understand how these deductions apply to your specific financial situation.
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