Hello!
1. What expenses can be claimed as tax deductions on my tax return?
If you itemize, you can claim the property taxes and mortgage interest from your primary (and a secondary) residence. On your rental you will report all income and expenses.
2. Does that mean I have to choose itemized deduction instead of standard deduction?
No. Your itemized/standard deduction is separate from your rental income and expenses. If your property taxes + mortgage interest + medical expenses + charitable donations are more than the standard deduction, you can itemize. If they are less than the standard deduction, you can take the standard deduction. Either way you will report your rental income and expenses.
3. Any advice can you give me in the process of purchasing and renting to reduce tax?
Track all income and expenses. TurboTax does a great job walking you through the rental income and expenses but in the first year, you may want to pay for TurboTax Live so you can call in and have an expert just go over the rental property to make sure it is set up correctly. As far as standard rental expenses, here's a list but it is not all inclusive and many may not apply to your situation. The bold ones are almost always included on rental property:
- Rental income
- Rental deposit
- Misc income like from laundry
- Property Management
- Advertising
- Repairs & Maintenance
- Utilities
- Property Taxes
- Insurance
- Professional Fees
- Mortgage Interest
- Licenses & Permits
- HOA
- Capital Improvements
- Depreciation - TurboTax will calcuate this once you enter the assets
- Travel
- Background checks
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