NUTS & BOLTS
LANDLORD/ TENANT ISSUES
It’s Back! WITH FILING TIME UPON US, HERE ARE SOME LAST-MINUTE TAX-SAVING TIPS EVERY LANDLORD SHOULD KNOW.
can just use the standard mileage rate and deduct a certain amount per mile that you drive for rental activity. The IRS sets a new standard mileage rate every year. NO. 4 INTEREST If you’re paying the mortgage down on your property, interest on the loan is deductible. In fact, for many landlords, mortgage interest is often their single biggest deductible expense. If you’ve used credit cards or a loan to pay for any expenses with the property, interest on these expenses is also tax-deductible. NO. 5 INSURANCE Insurance on the rental property – in- cluding coverage for fire, theft, liability and more – is deductible. NO. 6 PROFESSIONAL SERVICES FOR THE RENTAL If you need to hire a professional for services pertaining to your rental, you can deduct those expenses. This includes the cost of legal services, accounting and property management fees. You can also claim some expenses related to evictions, such as some court costs and filing fees. If you’re self-employed and responsi- ble for your own health insurance, you can deduct your premiums. According to TurboTax, these will be taken off of your adjusted gross income, rather than being included as an itemized deduction. NO. 8 STATE AND LOCAL SALES TAX You’ll also have the option to claim either state and local income taxes, or local general sales tax that you paid during the year, but not both. So if your state has no income tax, consider deducting state and local sales taxes that you paid throughout the year. Have a look at the IRS sales tax calculator NO. 7 SELF-EMPLOYED HEALTH INSURANCE
by Kevin Ortner
ax time is looming – again. This means that landlords across the country are compiling expense and income reports, and rushing to get their taxes in before the deadline, which this year is April 18. While tax time has to be the most tedious time of the year for landlords and small business owners alike, one of the benefits of being a landlord is the myriad of tax deductions that you’re able to take advantage of. The IRS considers rental property activity to be a business, and while you have to report your income, you can also take advan- tage of some excellent tax breaks that are available to professional landlords. The fact is, though, that many land- lords aren’t aware of just how many ex- penses they’re able to write off, especial- ly when they’re first starting out. This is unfortunate, because these deductions can help you save on your tax bill, and they can add up considerably over time. While you’re undoubtedly hard at work on your taxes, you’ll want to spend a few moments to ensure that you’re taking advantage of all the deductions that are available for landlords. Here’s a look at a few things that you can do to help reduce your tax bill this year. T TAKEADVANTAGE OF DEDUCTIONS Deductions are a landlord’s best defense against exorbitant tax bills. And knowing how to use them effectively can help you to save.
NO. 1 REPAIRS Repairs are considered to be any effort to maintain the current condition of the property. Upgrades usually don’t fall into this category, but fixing the air conditioning unit, painting, plumbing, repairing the foundation and roof, and contractor expenses are usually deduct- ible. Keep in mind that the IRS differen- tiates between repairs, which you’re able to deduct, and improvements, which can’t be claimed as a deduction but in- stead must be depreciated over a period of several years. NO. 2 MAINTENANCE Maintenance costs are expenses in- volved with the upkeep of your proper- ty. This includes regular maintenance like landscaping and tree trimming, as well as pest control, HVAC filters, pool chemicals, lightbulbs and even smoke detector batteries. Keep your receipts; these little expenses can add up fast. NO. 3 TRAVEL EXPENSES An estimated 50 percent of American landlords do not live near their rent- al properties. If you’re a long-distance landlord, you can deduct travel expenses to and from your rental, including airfare, car rentals and hotel costs. You can even deduct 50 percent of your meal expenses during long-distance travel. If you live near your rental, you can still deduct the expenses involved with trips to and from the rental. This means that you can track and claim your actual expenses, including gasoline, oil and vehicle upkeep. Or you
80 | think realty magazine march :: april 2017
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