What Expenses Can I Claim Against Rental Income?

Man calculating costs

How To Minimize Income Tax On Your Rental Properties

If you’re looking for a way to fund your new life overseas—or boost your existing pension so you can enjoy more luxuries—investing in a rental property abroad is an excellent option.

An investment in a piece of rental property in a foreign country is one of the smartest things you could do with your money right now. And not just for the passive income it can provide…

A house and a bright blue sky
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First, a piece of property is a hard asset that, unlike stocks (and barring some act of God), can’t disappear altogether. Second, in buying a foreign property, you’re diversifying overseas—critically important in our current political and financial climate—and further protecting your future and that of your loved ones…

Great profit can be made by renting out your overseas property either as a vacation rental or on a long-term lease. As with most money earners, any income made from your rental property will be taxed, either by the United States, or the country where your property is located. These taxes can make a serious dent to your profit margin.

Home buyers are taking home keys from sellers.
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However, many landlords are unaware of the expenses which can offset your taxable income, reducing your overall tax burden, and maximizing profits from your rental property.

So, What Exactly Can Be Claimed Against Rental Income…

Any expenses claimed against your rental income must be solely for the upkeep and maintenance of the property. Any “improvements” to the property, such as buying a dishwasher when there previously wasn’t a dishwasher, cannot be claimed against your rental income.

Man on ladder cleaning house gutter from leaves and dirt
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Here Are Some Expenses Which Can Be Deducted From Your Rental Income:

  • Costs of general maintenance and repairs of the property,
  • Costs of cleaning materials,
  • Wages for gardeners, painters, or cleaners required to maintain the property,
  • Utilities, including water, electricity, and gas,
  • Homeowners’ insurance,
  • Property management fees,
  • Legal and accounting fees,
  • Advertising costs, including phone calls and stationary.

You can also deduct reasonable expenses for trips to manage your rental property abroad. If you fly once a year to check on a property, do maintenance, and/or meet with your local accountant or attorney, the cost of the trip can be deducted from your rental income. If you have several properties in the same location, amortize the trip’s expense over the different properties.

Passport and two airplane tickets sticking out of the pocket of jeans.
Adobe Stock/Artem

The United States is one of the few countries that taxes its citizens on worldwide income. While traditionally the IRS turned a blind eye to U.S. citizens or green card holders who resided abroad, the advent of FATCA and the digital age have given them Xray vision. Nowadays, tax must be paid on any rental income earned abroad. Thankfully legislation exists to avoid double-taxation on your rental income.

As the joke goes, “Trying to do your own taxes is like a do-it-yourself mugging.” The above tax information is given in a general manner and all readers should consult an attorney and/or a tax advisor before making any radical changes to their tax structuring. Remember… individual circumstances vary, as do the tax ramifications.

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