Tax Deductions – Did You Know?
By McKenna Thompson, CPA; Ripley Doorn & Company, P.L.L.C, Guest Writer
As the end of the year approaches, many people turn their attention to strategies for income tax savings. Landlords often have unique opportunities for tax deductions related to their rental properties. Here are some items that are often overlooked.
Track your mileage
Landlords are able to deduct the cost of travel associated with their rental properties, including local driving. Travel expenses incurred to collect rent, maintain or repair the property, or address other issues with your tenant or rental property may qualify.
The easiest method to calculate your deductible auto expense is to multiply your business miles by the standard mileage rate (56 cents per mile for 2021). The standard mileage rate is designed to cover most of the costs of operating your vehicle for business purposes, including fuel, insurance, registration, maintenance and repairs, lease payments, and depreciation. Parking fees and the business portion of interest on your auto loan can be deducted in addition to the standard mileage rate.
The IRS requires you to keep documentation to support your travel deduction. You should keep a mileage log that lists the date of your trip, the business purpose, and the business miles driven.
Is QBI for you?
Beginning in 2018, landlords may qualify for a new tax deduction of up to 20% of their net rental income. This special income tax deduction, the Qualified Business Income Deduction (QBI), is subject to some income limitations, and it only applies to rental activities that rise to the level of a trade or business. Your tax advisor can give you more information about the QBI Deduction and whether your rental properties qualify.
Don’t count on deducting remodel costs all at once
Most costs associated with owning a rental property are deductible in the year you pay the expense. However, many landlords are surprised to learn that their expensive remodel has to be deducted in smaller amounts over several years. Depending on the dollar amount, new appliances, furniture, flooring, or landscaping projects may need to be depreciated over a number of years rather than deducted in the year of purchase. Property remodels are also subject to longer depreciation periods, usually deducted over 27.5 years (residential rentals) or 39 years (non-residential rentals).
Navigating tax deductions as a landlord can be tricky. As the tax laws change and become more complex, it’s more important than ever for property owners to have access to reliable tax advice. If you have any questions about your current tax situation, please feel free to contact McKenna Thompson at 208-375-0550.
RMA would like to let you know that we have scheduled the optional services for 2021.
Optional Services being completed throughout the fall are:
- Gutter Cleaning
- Hot Water Heater Inspections
- Fall Yard Clean Up
- Sprinkler Blow Outs
The maintenance updates only apply to those of you who have pre-ordered these preventative maintenance services. If you didn’t opt in for a service you read about in this newsletter, and would like to schedule a service, just email your property manager to let them know.
You can always see updates on the status of your property’s tenancy renewal on your OWA. Information about the tenants renewal or notice to vacate will be there for you to review once we get close to the end of the lease.
If you have trouble logging into your client portal, please contact your property managers or Brandy Ker at firstname.lastname@example.org.
This month’s tenant newsletter discusses noise levels in community living.
Check out our tenant newsletter this month: https://rentalsinboise.com/property-management-blog/november-2021-tenant-newsletter/