Tax Deductions on Rental Property?

I鈥檓 curious to know what tax deductions I can take in the following situation, if any:

I own rental property. In the past 12 months (and 2 tenants), I did not receive rent for a total of 4 months (I鈥檝e had great luck with tenants this year!). Also, the rent is only 戮 the mortgage, so I pay 录 of the mortgage out of pocket every month.

I know I can deduct maintenance and repairs on the home. Can I deduct proprty management fees,leasing fees, court fees for the evictions and is there any deduction for the loss of the 4 months of rental income while a tenant was still occupying the property during the eviction process?

Please let me know if more information is needed for a more accurate answer, and thank you in advance for any information.

You don't get a deduction for lost rent (you don't get taxed on the money you didn't get).

You put the rent you did get on the schedule E, and then take the rest of your valid expenses--mortgage interest (not the principal), taxes, legal fees, repairs, etc AND depreciation. It sounds like you have a loss for the year. If your income is too high or you weren't actively participating (as suggested by those management fees), you defer the loss until either you have income or you sell.

You file Schedule E with your Form 1040 tax return to account for rental income and expenses.

You can deduct all of the reasonable and necessary costs associated with the rental property. Such things as mortgage interest, interest on other loans you take out for funds to maintain the property, property taxes, repairs, maintenance, utilities paid by you (for example when the property is vacant) insurance, property management fees and commissions, advertising, attorney's fees, eviction filing fees, court costs, and other associated costs, etc. are all fair game.

You do not get a "deduction" for the time that the tenant wasn't paying rent but since you only show the rent you actually receive that's really a wash. If you do recover anything from a tenant either throught the eviction process or small claims court, don't forget to include that as income on the Schedule E.

Keep careful records of all of your costs and keep all receipts. Don't forget to take the depreciation deduction as well. That will be recaptured when you sell even if you don't take it so it's worth the effort to calculate it and take it now.

Another respondent has mentioned active participation. If you don't actively participate in the rental activiey you have to defer any losses to some point in the future when you do actively participate. HOWEVER merely hiring a property manager does NOT mean that you are not actively participating! As long as you reserve the final say on tenant approvals and major expenditures you meet the active participation requirements and can deduct your losses.

What was not mentioned was the passive activity loss rules. That's related to active participation but there's a bit more to it. Passive activities such as rentals may be limited both by the active participation rule mentioned above but also by the "at risk" rules. Basically that means that you must have something "at risk" in the business activity. That's not an issue for most landlords since your equity is at risk as well as the outstanding balance of any mortgage. Where it can kick in is if a property is fully depreciated and no longer encumbered by a mortgage. Just keep that in the back of your mind in case you find yourself still renting out this property in 20 years or so. What I'm leading up to is that if you meet the active participation rules and the at risk rules, you may deduct up to $25,000 in passive activity losses per year. If your losses exceed that you'll have to carry them forward to a future tax year.

There is no such a thing as a deduction forr rent not received. Deductions are only expenses you have, but not loss of anticipated income. All expenses are deductable in the year incurred, for cash basis taxes. You can even deduct expenses paid by credit card in the the year you charged them to the card, even if you pay the bill the following year.

You can also use a schedule C to file the taxes, if the property is owned by an LLC. The use of and LLC limits you liability, should something happen on the rental property. It also allows you to take on partners.

The LLC is eassy to form online. www.delawareinc.com

You can deduct maintenance and repairs, and the fees you mention, but not the rent you didn't receive.

And that doesn't qualify as a bad debt, since it's money you never had. A bad debt is for after-tax money that you actually paid out, but never got value for.