As a landlord, did you know that you technically own a business? You do! This means that you need to file your taxes a bit differently. Depending on how you titled your rental property, some changes can be more complex. However, if you are the single owner of the property, the filing process is fairly simple.
Go beyond merely keeping track of rent receipts. Make sure you have records of your expenses as well. Get the most out of your investment by carefully filing and claiming deductions. If you do choose to hire a professional accountant to file your taxes, even the portion of time he or she spends on rental-related income can be written off as a business expense.
Renovation vs. Repair
The difference between renovations and repairs can create confusion for many landlords. While they seem similar, they are dealt with differently within the tax code. While repairs to rental property are tax deductible in the year they are completed, renovation-related expenses must be capitalized and depreciated over a number of years.
A quick way to decide what is a renovation and what is a repair is to look at the overall value of the property. When you replace damaged carpet with new carpet, the overall value does not increase. It merely returns to what it was originally. Therefore, replacing carpet is classified as a repair. However, if you install solar panels, then your overall value increases. That’s a renovation.
There are a number of deductions available that many landlords forget about. When paying certain insurance premiums or legal fees, ask yourself if you would do so if you were not a landlord. If your answer is no, the money you’re paying is probably deductible.
Make sure you are not missing out on any of the following deduction opportunities:
- Rental property utilities
- Property management
- Maintenance staff
- Interest paid on property mortgage
Once again, anything you would not pay for if you were not a landlord is probably deductible.
If you have more questions about the business side of owning rental properties, call Keyrenter today at (844)-KEY-RENT!