Renting out a property that you already own is a realistic goal for people of modest means who wish to earn a passive income; all you have to do is not sell your old house when you move to a new one that accommodates your growing family or your empty nest lifestyle.  Like any self-employment gig, it comes with its share of expenses, and with experience, you can learn to maximize the tax deductions associated with your rental property; your lawyer or tax preparer can help you find the ones for which you are eligible.  The COVID-19 pandemic has crushed the dreams of many families that hoped to supplement their income by renting out their former family home.  Now that the federal government has extended the eviction moratorium until October 3, 2021, Mom-and-pop landlords across the country, but especially in Alabama, have been outspoken about the financial hardship that the ongoing eviction moratorium has caused them.  While the dispute over compensation for the financial losses small-time landlords have suffered because of unpaid rent is ongoing, landlords can at least claim the expenses they have incurred while maintaining the properties during the many months of unpaid rent.  A Birmingham real estate lawyer can help you cope until the eviction moratorium ends.

Unfortunately, Unpaid Rent Isn’t Tax Deductible

Landlords, especially individuals and families who only rent out one or several houses or condo units, are feeling the sting of the eviction moratorium.  In the case of tenants unable to pay because of health issues or pandemic-related income loss, unemployment benefits and rent relief from the state have enabled some of them to continue paying rent, but the wait times for receiving rent relief are so long that landlords have had to cover expenses related to rental properties out of their own pockets.  And then there are the tenants who have taken advantage of the eviction moratorium and stopped paying rent even though their income enables them to pay; some of them never even lost their jobs during the pandemic.

During the eviction moratorium, small-time landlords have had to use their small-time resources to cover maintenance of the rental properties, operating expenses, property taxes, and sometimes even mortgage payments.  The bad news is that, at tax time, you cannot deduct the amount of money you lost because of unpaid rent during the eviction moratorium on your 2021 tax return.  The following rental property-related expenses and losses are tax deductible, however:

  • Property taxes
  • Mortgage interest
  • Operating expenses
  • Depreciation of the rental property’s value
  • Repairs to the rental property

Depending on how much income you earn from your rental property, it might also be eligible for a qualified business income (QBI) tax deduction.

Let Us Help You Today

Even in the best of times, being a small-time landlord carries a risk of legal and financial disputes.  An Alabama real estate lawyer can help you weather the storm of an eviction moratorium that has been extended yet again.  Contact Cloud Willis & Ellis for help today.