Rental Property Tax Deductions - Your Lake Martin Investment Property




From finding tenants to fixing faucets, renting out a home in the Lake Martin area can be A LOT of work. If that doesn’t dissuade you, you’ll appreciate collecting the rent checks and taking advantage of tax deductions. In fact, you can use many rental property expenses to offset your rental income. IRS Publication 527 has all the details (check them out on IRS website)!

WRITING OFF RENTAL HOME EXPENSES
Many rental home expenses are tax deductible. Save receipts and any other documentation and take the deductions on Schedule E. Figure you’ll spend four hours a week, on average, maintaining a rental property, including recordkeeping.
In general, you can claim the deductions for the year in which you pay for these common rental property expenses:
  • -          Advertising
  • -          Cleaning and maintenance
  • -          Commissions paid to rental agents
  • -          Home owner association/condo dues
  • -          Insurance premiums
  • -          Legal fees
  • -          Mortgage interest
  • -          Taxes
  • -          Utilities

Less obvious deductions include expenses to obtain a mortgage and fees charged by an accountant to prepare your Schedule E. And don’t forget that a rental home can even be a houseboat or trailer, if there are sleeping, cooking and bathroom facilities. Moreover, the location of the rental home doesn’t matter. It could even be outside the United States.

LIMITS ON TRAVEL EXPENSES
You can deduct expenses related to traveling locally to a rental home for such activities as showing it, collecting rent or doing maintenance. If you use your own car, you can claim the standard mileage rate, plus tolls and parking. For 2015, it was 57.5 cents per mile.
Traveling outside your local area to a rental home is another matter. You can write off the expenses if the purpose of the trip is to collect rent or, in the words of the IRS, “manage, conserve or maintain” the property. If you mix business with pleasure during the trip, you can only deduct the portion of expenses that directly relates to rental activities.

REPAIRS VS. IMPROVEMENTS
Another area that requires rental home owners to tread carefully is repairs vs. improvements. The tax code lets you write off repairs – any fixes that keep your property in working condition – immediately as you would other expenses. The costs of improvements that add value to a rental property or extend its life must instead be depreciated over several years. (More on depreciation below.)

Think of it this way: Simply replacing a broken window pane counts as a repair but replacing all of the windows in your rental home counts as an improvement. Patching a roof leak is a repair; re-shingling the entire roof is an improvement. You get the picture.

DECIPHERING DEPRECIATION
Depreciation refers to the value of property that’s lost over time due to wear, tear and obsolescence. In the case of improvements to a rental home, you can deduct a portion of that lost value every year over a set number of years. Carpeting and appliances in a rental home, for example, are usually depreciated over five years.

You can bring depreciating the value of the entire rental property as soon as the rental home is ready for tenants and you hold it out for rent, even if you don’t yet have any tenants.



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