It’s That Time of Year–Tips for Preparing Your Rental Property for the Tax Man
Posted on 21. Feb, 2010 by Kat Schneider Fotheringham in Blog, Business Travel, Uncategorized, corporate housing, executive accommodations, international business travel
If you’ve got an investment property you’ve been renting out for corporate housing or income, even if you’re having a less than easy time of keeping it occupied, it still can be a tax deduction bonanza. For sure, the tax rules and deductions for individuals who rent out their properties on a short-term basis are a bit complicated. The deductions you can take depend on a number of factors, including how often you personally use the property, how many nights or a percentage of the nights you rent the property out, and your personal adjusted gross income. Here are some rules of thumb to follow:
1. First, figure out your gross rental revenue. Your gross rental revenue would be all monies you keep that are collected from renters. These include the following:
-Base rental rate
-Cleaning fees
-Parking fees
-Amenity fees
-Pet fees
-Any portion of a security deposit that you keep, whether it is for a short- or long-term
2. Then calculate your possible deductions
-Property taxes
-Property insurance
-Hurricane/wind/flood insurance
-Liability insurance
-Mortgage interest
-Private mortgage insurance (PMI)
-Refinance and/or closing fees
-Homeowner’s Association dues
-Special assessments (may be amortized under capital improvements)
-Travel expenses to attend meetings
-Operating Expenses
-Utility bills, including power, gas, water/sewer, phone, cable/satellite TV service, internet, etc.
-Housekeeping expenses
-Expenses incurred to repair damages
-Out-of-pocket payments/deductibles for insurance claims
-Maintenance expenses, including pest control, lawn and garden upkeep, preventative maintenance, etc.
-Extra compensations to renters, housekeepers, maintenance (including holiday gifts/bonuses)
-Linens and linen cleaning services -Supplies, including paper towels, toilet paper, cleaning supplies, etc.
-Travel expenses to your corporate housing property to do maintenance (must be well-documented)
-Meals while you are at your corporate housing property on “maintenance trips”
-Property management fees and commissions
-Home office expenses, including computer equipment, furnishings, utility bills, etc. based on the percentage of business use vs. personal use (usually a portion based on the percentage of square footage of your home office—for example, if your home is 2,000 square feet and you have a 200-square-foot home office that you use solely for your managing your corporate housing business, then 10 percent of your household expenses may be tax deductible)
3. Track and Deduct Advertising Expenses
-Any ads you place on the internet and in publications
-Business cards and other printing costs
-Website building and hosting expenses
-Photography, virtual tours, copywriting services
-Capital Improvements and Amortized Items
-Improvements on your property
-Furnishings and décor
-Depreciation deductions
-Tools (hammers, saws, etc.)
-Cameras, computers, cell phones, and other equipment necessary to run your corporate housing business
-Other expenses
-Checking account and credit card account administrative fees (for business purposes only)
-Postage for mailing contracts, directions, security deposits, etc.
-Legal fees
-Delivery of your corporate housing industry publications
-Income tax preparation
-Educational expenses
-Seminar attendance and/or books about renting
Obviously it can’t be emphasized ENOUGH how important it is to document all of your expenses, and make sure you keep them organized and easy for a tax preparer to use when completing your tax forms. When you’re gathering this data and crossing all the t’s and dotting the I’s, just keep in mind how much you’ll save in the long run.
