14 Jan 10 Rental Tax Deductions
It’s the beginning of the new year which means we’re busy preparing Form 1099-MISCs and 2016 year-end statements for our landlord clients. These two critical documents are needed for our landlords to report their rental income tax requirement and properly document the income generated on their rental property. Similar to how income from an employer is reported on a W-2, gross rental income before deductions is reported on a Form 1099-MISC. We also accompany this form with an year-end statement which summarizes all the income and expenses handled by us for the entire year . This makes tax preparation much simpler by consolidating 12 months of financial activity on 1 page broken out by category.
If you’re one of our landlord clients, please keep in mind that the expenses listed on your year-end statement may not be the only expenses in which you can deduct and this statement only lists the income/expenses that funneled through us. Any expenses related to your rental property which you paid yourself may still be deductible.
Here are ten rental income tax deductions to remember this tax season:
Contents
Rental Income Tax Deductions
1. Interest
The interest you pay on your mortgage is fully deductible the same as if the home were your primary residence. You should receive a Form 1098, Mortgage Interest Statement, from your mortgage company to file with your tax return.
2. Depreciation
The cost of your rental property cannot fully be deducted in the year your purchased it. Instead, you can depreciate its value over time. Depending on your situation, it may or may not be advantages to depreciate the property so you should seek the advise of a tax professional to see if this is a deduction you should take.
3. Repairs
All repairs to the home that are ordinary, necessary, and reasonable are deductible expenses. If we paid for the repairs on your behalf, the expenses will be included on our year-end summary statement. We also upload a copy of the invoice to your Owner Portal. Remember that you can and should deduct any repairs that you did yourself as long as you have the receipts.
4. Local Travel
If you live in the same local area of your rental property, you can deduct the cost of travel to and from your property to check on it or handle tenant issues. You can either track your actual expenses (gas, upkeep, repairs, etc.), or report your mileage using the standard IRS Mileage Rate.
5. Long Distance Travel
Most of our landlords live out of the area and should remember that if they traveled to the Denver area to check on their rental property, they can deduct the air fare, hotel expense, car rental, gas, meals (per diem), and any other travel related expenses. Detailed records are a must as IRS auditors closely review such deductions to detect abuse.
6. Home Office
Landlords may be able to declare home office expenses for their rental investment business. Consult with a tax professional to see if you qualify.
7. Property Management Fees
Our fees as a property manager are fully deductible by our landlord clients and are detailed on your year-end statement.
8. Casualty Loses
Let’s hope you don’t need this deduction, but if your rental property is damaged or destroyed due to an event such as fire or flooding, you may be able to deduct all or a portion of your loses. The amount of the deduction will depend on how much of your property was destroyed and whether or not any of it was covered by insurance.
9. Insurance
Pretty much any insurance that you have for your rental property is deductible. The most common insurance most landlords have is their homeowners insurance policy and any other liability insurance policy on the property.
10. Homeowner Association Dues
If your rental property is located within a homeowners association that you are required to pay dues/assessments to, you can deduct these payments. Be sure to retain copies of the assessment invoice.
There really is no way to make tax preparation fun, but at Integrity Realty & Management, we strive to at least make our clients’ rental income reporting a cinch with clear and concise reports. We are always available to answer any questions you have as you begin preparing your tax return.
Disclosure: Integrity Realty & Management, it’s employees and agents, are not licensed CPAs or qualified in any way to give tax advise. Nothing in this post should be construed as professional tax advice and you are encouraged to seek the council of a competent professional if you have any tax related questions.
