If you’ve listened to your professional realtor or other competent authority, you know that many rental home expenses are tax deductible. One very important aspect of making real estate investing a profitable, successful business is your ability to stay organized. If you’ve never had any other business you may think it’s as easy as keeping your business checkbook balanced and saving receipts for purchases to be prepared for things like filing your business taxes. That’s a major part, but on a much larger and intricate scale than any personal finances. (Unless, maybe, you’re Oprah!) Sure, there will be things that you can’t deduct, but that’s no reason to omit them from your records. Unless you’re a tax professional, think of everything as important, and at least make proper documentation.
That is where organization comes in. Have a system, ask your accountant, and/or use software designed for proper business bookkeeping. A simple spreadsheet might not do the trick. Incorporate a filing system into your equation and maintain order. If you are organized in every step of the process (keeping receipts, documenting expenses and purchases, etc.) when it is time to sit down with your tax-preparer, actually filing will go much smoother for you and them. You will also remove the risk of penalty for inaccurate and incomplete information.
The most important thing to keep in mind, if you don’t have proper records to substantiate ALL that you are trying to possibly deduct, is that a reputable accountant or tax professional will not include it in your taxes. In general, you can claim the deductions for the year in which you pay for these common rental property expenses. So, make sure that your records are thorough with regards to:
- Advertising
- Cleaning and maintenance
- Commissions paid to rental agents
- Home owner association/condo dues
- Insurance premiums
- Legal fees
- Mortgage interest
- Taxes
- Utilities
There may be and most likely are items missing from the above list that are specific to you and your real-estate investment business. That is why, and this has been advised many times before, that you secure and maintain a relationship with a professional whose business acumen is business tax filing. You wouldn’t let just anyone that can hold a pair of scissors loose on your head of hair, would you? NO! You employ the services of a professional, educated for that purpose, whose business it is to provide desired results in their field. With a haircut, you only get a bad head of hair for a while. With taxes, there’s a unique set of unpalatable problems that go along with choosing the wrong path. Make good choices, and as always, Carod Properties is here to help!
