Can utilities and internet be claimed as tax deductions for my rental property?
Hey everyone, I recently purchased a small apartment building with 4 units and I'm including all utilities in the rent. Each tenant pays me $1,350 monthly, and this covers their gas, electricity, water, internet, and basic cable package. I'm starting to realize these utility costs are adding up fast. I'm paying around $3,200 every month just for utilities across all units. That's going to be like $38,400 for the whole year! **Can I deduct all these utility expenses when I file my taxes? Will I get that money back as part of my refund?** Also, I'm using one of the vacant rooms in the building as my office to manage the property. **Can I also claim my personal cell phone bill and the portion of internet I use for property management on my taxes?** Any advice would be super helpful. This is my first year as a landlord and I'm trying to figure out all the tax stuff before next filing season.
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Kayla Morgan
Yes, you can absolutely deduct those utilities as business expenses! The utilities you pay for your rental units (gas, electric, water, internet, cable) are all considered ordinary and necessary expenses for your rental business. You'll report these on Schedule E when you file your taxes. One important clarification though - these are deductions that reduce your taxable rental income, not credits that get "returned" to you dollar-for-dollar. So if you collect $64,800 in rent for the year ($1,350 × 4 units × 12 months) and have $38,400 in utility expenses, you'd only pay taxes on $26,400 (plus any other deductions you might have). For the office space, if you're using a room exclusively for managing your rental property, you can likely take a home office deduction for that portion of your utilities. And yes, the business portion of your cell phone could be deductible too, but you'll need to determine what percentage is used for the rental business versus personal use.
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James Maki
•So does that mean I should be tracking what percentage of my phone bill is for calling tenants/contractors vs personal calls? How do people usually figure that out? And what about internet - can I deduct the whole bill since I need it to list vacancies online and communicate with tenants?
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Kayla Morgan
•For your cell phone, you don't necessarily need to track every single call, but you should come up with a reasonable estimate of business use. Many landlords estimate something like 30-50% business use, but it depends on your situation. Just be prepared to justify your percentage if asked. For internet in your home office, you can deduct the percentage that corresponds to the business use of your home. So if your office takes up 10% of your home's square footage, you could deduct 10% of your internet bill. However, if you're talking about the internet you provide to tenants in the rental units, that's 100% deductible as a rental expense on Schedule E.
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Jasmine Hancock
I've been using taxr.ai for my rental property taxes and it's been a game changer for tracking all these deductions. I was in the same situation last year with my duplex - wasn't sure how to handle all the utilities I was paying for my tenants. The tool at https://taxr.ai guided me through exactly which expenses were deductible and how to categorize them properly. It even spotted some depreciation deductions I was missing for appliances and property improvements.
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Cole Roush
•Does taxr.ai handle multiple properties? I've got a mix of long-term rentals and an Airbnb and it's getting complicated keeping everything straight.
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Scarlett Forster
•I'm skeptical about these tax tools. How is this different from TurboTax or H&R Block? Those always miss stuff when I've used them in the past and I ended up hiring a CPA.
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Jasmine Hancock
•Yes, it handles multiple properties really well - each property can be set up separately with its own expenses, income tracking, and depreciation schedules. I particularly like how it organizes everything by property but then combines it all for your final tax forms. For your question about how it's different - I found it's much more specialized for landlords and real estate investors than the general tax software. It asks specific questions about rental scenarios and explains the rental-specific deductions that most general tax programs don't cover in detail. It's designed specifically for property owners rather than trying to cover every possible tax situation.
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Scarlett Forster
Just wanted to follow up about taxr.ai - I decided to give it a try despite my skepticism, and wow, I'm impressed! I uploaded my utility bills, maintenance receipts, and property tax statements, and it automatically categorized almost everything correctly. Found nearly $4,300 in deductions my previous tax software missed last year. The interface specifically designed for rental properties made so much more sense than trying to force everything into general tax categories. Wish I'd known about this earlier!
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Arnav Bengali
If you're trying to get clarification from the IRS about utility deductions for rental properties (especially the home office part), good luck getting through to them! I spent 3 weeks trying to reach someone. Finally used Claimyr (https://claimyr.com) and got through to an IRS agent in about 15 minutes. They have this system that holds your place in the IRS queue and calls you when an agent is available. You can see how it works here: https://youtu.be/_kiP6q8DX5c. The agent confirmed I could deduct 100% of the utilities I pay for tenants, and gave me specific guidance on the home office portion.
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Sayid Hassan
•Wait, you actually got through to a real IRS person? I thought that was impossible these days! How much does this service cost? And did they actually give you helpful info or just read from a script?
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Rachel Tao
•This sounds like a scam. How would some random service get you through the IRS phone system faster? The IRS phone system is a disaster by design. I'll believe it when I see it.
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Arnav Bengali
•Yes! It was an actual IRS representative who answered my specific questions. It was such a relief after wasting hours listening to hold music and getting disconnected. I don't want to get into specific costs here, but it was worth every penny for the time saved. The IRS agent I spoke with was knowledgeable and helped me understand exactly how to handle my specific situation with rental property utilities versus personal usage. She even emailed me some helpful documentation afterward that clarified everything.
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Rachel Tao
I have to eat my words and apologize to Profile 9. I was really doubtful about Claimyr, but I was getting desperate after trying to reach the IRS for nearly 2 months about some rental property questions. I tried the service yesterday and got connected to an IRS agent in about 22 minutes. The agent answered all my questions about utility deductions for my rental properties and even helped resolve a notice I received. I'm still shocked it actually worked. Never been so happy to be wrong!
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Derek Olson
Don't forget about depreciation! Besides the utility deductions, you should be depreciating the building over 27.5 years. That's a huge deduction. I own several rental properties and depreciation typically saves me more in taxes than any other single deduction. Talk to a tax professional though - it gets complicated with recapture when you sell.
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Danielle Mays
•Can you explain depreciation a bit more? Is it worth doing if I plan to sell the property in just a few years? And do I need to track all my improvement expenses separately?
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Derek Olson
•Depreciation isn't optional - the IRS requires you to take it whether you want to or not. It's based on the idea that buildings wear out over time, so you're allowed to deduct a portion of your building's value each year over 27.5 years (for residential rental property). Even if you plan to sell in a few years, you still need to take depreciation each year. When you sell, you'll deal with something called "depreciation recapture" where you may have to pay some tax on the depreciation you took. But it's still usually advantageous because of the time value of money and potentially different tax rates.
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Roger Romero
Be careful about claiming 100% of your personal cell phone! I got audited last year for exactly this. The IRS agent said there's no way my cell phone was used solely for business. They made me prove what percentage was business vs. personal. I now keep a log for one month each quarter to establish the business percentage. Better safe than sorry!
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Anna Kerber
•That's good advice. How detailed does your log need to be? Do you just estimate or track every call?
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Layla Sanders
Great question! I'm also a new landlord and went through this exact same confusion last year. Yes, all those utility expenses for your rental units are absolutely deductible business expenses - gas, electric, water, internet, and cable that you're paying for your tenants. One thing that really helped me was setting up a separate business bank account and credit card just for rental property expenses. It makes tracking everything so much easier come tax time. I pay all my rental utilities through that account, so there's a clear paper trail. For your home office situation, since you're using a room exclusively for property management, you can likely deduct the business portion of your home expenses including utilities. Just make sure you're only claiming the percentage that corresponds to your office space. The key thing to remember is these are deductions that reduce your taxable income, not dollar-for-dollar refunds. But they can still save you a significant amount depending on your tax bracket. I'd definitely recommend keeping detailed records of all your expenses and maybe consulting with a tax professional for your first year to make sure you're maximizing your deductions properly.
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Emma Anderson
•This is really helpful advice about setting up separate accounts! I'm just getting started with my first rental property and keeping everything organized seems overwhelming. Did you use a regular business checking account or something specifically for real estate investors? And do you put ALL rental-related expenses on that card, even small stuff like hardware store trips for minor repairs?
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Mohammed Khan
•@Emma Anderson Yes, I use everything on the business card - even the small $15 trips to Home Depot for light bulbs or cabinet handles. Those little expenses really add up over the year! I just use a regular business checking account from my local credit union, nothing fancy. The key is consistency - if it s'for the rental property, it goes on that card. Makes reconciling everything at tax time so much easier when you re'not trying to separate business and personal expenses from mixed statements. Plus many business cards offer better rewards for business purchases.
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Luca Conti
This is such a timely question! I just went through my first year as a rental property owner and had similar questions about utility deductions. Yes, absolutely deduct those utility expenses - they're legitimate business expenses for your rental operation. What surprised me was how much documentation the IRS expects, so start keeping detailed records now. I create a simple spreadsheet tracking each utility bill by property and month. One tip that saved me headaches: take photos of your utility bills when they arrive and store them digitally. I had a water bill go missing last year and trying to get a duplicate from the utility company during tax season was a nightmare. For your home office deduction, measure that room carefully and calculate the exact percentage of your home's square footage. The IRS can be picky about this, so precision helps if you ever get questioned. Also consider opening a separate business bank account if you haven't already - it makes tracking rental income and expenses so much cleaner. I wish someone had told me this from day one instead of trying to sort through mixed personal/business transactions later. Good luck with your first tax season as a landlord! It gets easier once you establish good record-keeping habits.
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Jake Sinclair
•@Luca Conti Great advice about taking photos of utility bills! I learned this lesson the hard way when my electric company couldn t'find a bill from 8 months ago during my first tax preparation. Digital backup is definitely key. One question though - do you track your utility expenses monthly or just gather everything at year end? I m'wondering if there s'value in doing a monthly reconciliation to catch any missed deductions or categorization errors before they pile up. Also, have you found any good apps or tools for organizing all these digital receipts, or do you just use folders on your phone/computer?
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