10 Tax Deductions for Residential Property Landlords



As investments go, small residential property landlords enjoy the most tax benefits. In a down year, rental property tax deductions can make a big difference whether you enjoy profits or suffer losses.

You can’t deduct expenses; however, if you rent to friends or relatives.

ID-100143633 adamrAs situations differ and changes occur in Congress regarding taxes on small residential properties, you might to talk with your tax advisor about these deductions:

1. Interest

If you don’t know already, you’ll probably find that your biggest deductible expense is interest. That is, if you pay mortgage interest on loans for either buying or improving your property.

You can also deduct interest you pay for products or services for your rental via credit.

2. Depreciation

Landlords typically deduct the cost of their property via depreciation over a multiple-year period. They don’t fully deduct the cost of property in the first year.

3. Repairs

To qualify in the eyes of the IRS, the costs of repairs that can be documented such as ordinary, necessary and reasonable, can be fully deducted in the year they were paid. For instance, repairs for plumbing, garage doors, or broken windows and more all qualify.

4. Travel – local

If you drive somewhere that concerns your property, you’re entitled to deduct travel costs. Deductible expenses range from trips to the hardware store to handling tenant complaints. If you don’t have a vehicle earmarked for servicing your rental property, you can only deduct the portion of expense you incur as a landlord.

You have a couple of choices: Deduct your mileage or your actual expenses.

5. Travel – long distance

You can deduct airfare, hotel bills and meals – if you travel overnight for your rentals. Note: Make certain you document all expenses – keep all records for your tax returns. Be careful to avoid the ire of IRS auditors.

6. Employees or independent contractors

You can deduct their wages as an expense if the work on your property. That a valid deduction whether it’s for a residential manager, other employee or independent contractor.

7. Home office

You can deduct home office expenses if you have separate space devoted to managing your rental property. You can also deduct a workshop if it’s used for your rentals.

8. Casualty and theft losses

If your rental property suffers a loss, you can deduct each item lost as an expense, from these events:

— Earthquakes

— Fires

— Floods

— Landslides

— Storms, such as hurricanes and tornadoes

— Vandalism, including vandalism to rental property by tenants

— Government-mandated demolition or relocation of a building (deemed unsafe following a disaster)

— Sonic booms

— Terrorist attacks

— Volcanic eruptions

 9. Insurance

Your rental property entitles you to deductions for insurance premiums – fire, theft, flood and landlord liability. You can also deduct the cost of premiums for heath insurance and workers’ compensation.

10. Fees for legal and professional services

You can get deductions for accountants, property management firms, real estate investment advisors and lawyers. Obviously, their work must concern your rental property.

Again, see your tax advisor for more details.

From the Coach’s Corner, see these related tips:

Tips on Understanding the Mindset of IRS Auditors — An IRS audit is enough to make you tense with cold sweat in the palms of your hands. More businesspeople have complained to me about the mean-spirited treatment at the hands of IRS agents than any other federal agency. Worse, the agents’ frequent lack of common sense is shocking.

4 Tax Tips for Your Home Office Write Offs — The best tip I ever got from a CPA was to move my firm from a rented office space to my home. But it was important to understand the tax code for qualified write offs. Following are some tips, but it’d be best to double-check with your tax specialist.

For Maximum Business Tax Savings, Year-Round Strategies Are Vital — Many business owners find they can plan their futures, operate their businesses more efficiently year-round, and take maximum advantage of tax savings when they file their returns. Ask your tax advisor about these 9 strategies.

Avoid Surprises: Best Practices for Landlords in Renting PropertyDue diligence is of paramount importance in renting property – whether you hire a property manager or you do-it-yourself. In this often litigious and incompetence and dishonesty in our society, it’s increasingly difficult to manage a rental property and to avoid poor-quality tenants.

Even Ordinary Folks Need 10 Best Strategies for Estate Planning — It’s a mistake to think estate taxes only apply to the super rich. Estate taxes hurt ordinary folks. Estate taxes are especially problematic for farmers and small businesspeople, alike, who own their buildings and have capital tied up in equipment to grow crops or to produce products.

The only difference between death and taxes is that death doesn’t get worse every time Congress meets.”

-Will Rogers 


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Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.





Photo courtesy of adamr at www.freedigitalphotos.net

Best Practices for Landlords in Renting Property



In this often litigious and incompetence and dishonesty in our society, it’s increasingly difficult to manage a rental property and to avoid poor-quality tenants.

Complete documentation is of paramount importance in renting property – whether you do-it-yourself or you hire a property manager.

You have to protect yourself from a myriad of threats. You need a lot of patience in performing due diligence.

Do a SWOT Analysis – your strengths, weaknesses, opportunities and threats — as a landlord.

If you hire a property management firm, don’t assume it’s 100 percent competent and ethical.

The firm can be an opportunity for your growth but it can also fail to perform in protecting real-estate assets.

(Scroll down for strategies in hiring a property manager.)

Hold the firm to the same high standards you would set for yourself to ensure success.

Here’s a checklist:

1. Brace yourself. Prepare for disappointments and roller-coaster rides. Keep your wits. Stay calm, no matter what.

You’ll encounter unforeseen soap operas and challenges. So treat all problems as opportunities for growth – as stepping stones not as dead-end obstacles.

2. Know all applicable landlord and tenant laws. You’ll have to know what you can do and not do as a landlord. That certainly includes credit checks.

Again, be aware of all legal factors even if you hire a property manager.

3. Use best business practices. Like any successful manager, create processes to remind you so you don’t forget critical steps and take shortcuts. Make it a comprehensive list of operations on how you do things.

Fine-tune your processes as laws and conditions change. Remember an operations checklist will enable you to prevent or manage potential stress factors.

4. Before hiring a property manager, referrals or testimonials are not enough for proper due diligence. Ask trusted confidantes to mystery shop the property-management firm as a tenant. Use a secret-shopping process as a landlord.

If you decide to consider hiring the firm, further use a screening mechanism to perform a background check. Look for red flags. Check with your state’s regulators, the Better Business Bureau, references, and online reviews.

5. Before obligating yourself in renting your property, make certain the tenant has a positive credit history. Charge an application fee to and do a credit check. The tenant must be able to give you a security deposit and timely rent.

Use an online tenant-screening firm (even if you have a property manager).

Additionally, get verifiable credit references.

“Asking questions will get you the performance you are after far more than dictating demands.”
-Dan James

6. For your region, check to see if your rental application can ask for the following. Until you’re confident, double check everything the property manager does in the recruiting and screening of tenants.

— Names, addresses and telephone numbers of current and past employers. (Check out the employer online to ensure you get honest answers. If you have a valuable piece of property, you don’t want a tenant who has a dubious employment.)

— Names, addresses and telephone numbers of current and past landlords. (Check out the past landlords online to verify you’re getting accurate information about the tenant.)

— Names, addresses and telephone numbers of personal references. (Remember birds of a feather, flock together. Research or at least Google the names of references to make sure of the persons’ veracity.)

— Social security numbers

— Drivers’ license numbers

— Their bank account numbers

— Credit references (Make sure they’re of quality, credible sources of information.)

— Ask for authorization to do a credit check.

7. Use a fool-proof agreement. Because rental agreements and leases help produce your income, understand the financial strength of the agreement so it’s for your benefit.

More tips on dealing with property managers:

1. Get a written agreement on any fees. Know what you’ll be getting. Don’t allow negative surprises.

Elite firms will not just collect rent, provide documentation in financials, or economically organize repairs, they’ll make you aware of depreciation schedules, and/or recommend investments for high returns and insurance options.

2. Negotiate when you can. If you anticipate placing a big portfolio of properties with the firm, know that you probably have leverage to negotiate fees.

3. Check the caliber of the firm’s staff. Determine whether the person which whom you make an agreement will personally manage your property. Otherwise, try to find out its personnel turnover history.

You don’t want to deal with an unorganized company resulting in your property being trashed.

4. Learn how many properties each person in the firm manages. You’ll want to make sure the person has a manageable workload. Get a commitment on how long it takes the firm to return telephone calls.

5. Check out the firm’s recruiting process. Review the quality of the firm’s tenant-recruiting — including its Web site, its ads and photography.

In marketing terms, assess the property manager’s ability to recruit the best tenants by using strong value propositions in promoting your property.

6. Verify screening procedures. Ask for examples on how the firm screens prospective tenants. Don’t settle. Make sure you get multiple tenants to consider.

You’ll also want to be given copies of tenant-related information. Again, make sure you double check the screening process by using an online tenant-screening firm.

7. The firm’s follow-up. Ask how the firm monitors or inspects your property after renting to a tenant.

8. Look for other professionalism traits. The firm must negotiate well with you and tenants. You might be paying the property manager, but remember the firm has legal and professional standards it must uphold for tenants. Don’t take it personally if you’re told you personally can’t make complex repairs.

8. Anticipate repairs. Don’t assume the firm has a network of quality, reliable repair people. Make sure you inquire about it. (Check out those repair people online and look for reviews.)

9. Set aside profits. Budget for contingencies such as paying for repairs.

10. Track results. Closely monitor the firm’s performance, especially the financial reports it gives you. Don’t hesitate to ask questions. If you aren’t satisfied with its performance, find another one.

From the Coach’s Corner, suggested reading:

6 Values for Financial Protection — Part two of the two-part series: “Solutions for a Roller Coaster Marketplace”   Debt is the catalyst for all financial woes – for individuals and the aggregate economy in the United States and globally, esteemed associate Joey Tamer astutely reminds us.

10 Tips for Hiring the Right Attorney for Your Business — In running a successful business, you typically need the services of three professionals — a good tax accountant or CPA, insurance agent and an attorney. Know that talent and skill levels are crucial for your success.

5 Marketing Tips for Non Pros to Make Extra Money in Real Estate –Are you looking for an additional source of income? Boost your retirement assets? Soft economy or not, the buying and selling of real estate is still a viable option for nonprofessionals to make extra money.

4 Tax Tips for Your Home Office Write Offs –The best tip I ever got from a CPA was to move my firm from a rented office space to my home. But it was important to understand the tax code for qualified write offs. Following are some tips, but it’d be best to double-check with your tax specialist.

“Asking questions will get you the performance you are after far more than dictating demands.”
-Dan James


 __________

Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry. 





Seattle business consultant Terry Corbell provides high-performance management services and strategies.