Insurance, Repairs, and Cleaning/Maintenance Costs for Tax Deductions (Rental Property Tax Deductions, Part 2)

You need to determine that all expert services and costs are set up correctly and fully reported for the requirements of IRS compliance, if you have decided to lease your property for profit. Let us look at a few of these expenses.

Insurance

Insurance payments are prepaid prior to a designated period of time. An example here might be: you obtained insurance for this particular rental property on March 2012 for $1200. April 2012 to March 31, 2013 is the protection period of this insurance policy. Since the protection time period does surpass the current tax year, you must apportion and allocate the premiums applicable for this current tax year only and then bring forward the balance for the upcoming filing period. This would mean that $900 (9 months April to Dec 2012) or $100 per month of qualified rental use is the permitted insurance premium.

Business and personal clients might receive a discount rate if the insurance company is willing to bundle their insurance premium plans. Only the business rental property applicable part can be deductible. The individual and non-business related use could be tax deductible with your individual income tax return. Finally, Title Insurance isn’t applied as an expense and should be inside the Cost Basis of the rental property.

Cleaning and Maintenance

If used on daily cleaning and maintenance of common places, then daily maintenance of the rental property will be an allowed expense. These kinds of expenditures are also confined to the hours which are allowable leasing hours and not personal use days. To make certain the rental property is in great condition and functioning order, you can try what other rental property owners do, and hire a local area hired service to maintain the property. These types of services will offer a range of professional services like common maintenance, dusting, washing windows, and cleaning appliances. Just these types of expert services are permitted, any type of structural repairs and/or modifications should be allocated to the Cost Basis of the rental property.

Repairs

Once in a while, there will probably be some kind of need to mend an appliance, do a bit of repainting, or some kind of activity which does not call for a major reconstruction of the rental property framework. These kinds of expenses which are common and necessary are tax deductible depending on the rental length of time.

Never include any kind of periods which will be looked at to be personal use times, because costs are only tax deductible against the earnings of the property. Just those costs that are related to the authorized rental time frame are allowed.

  • You can get the various forms outlined within this article on the Internal Revenue Service’s website. If you want more info, see IRS Publication 527.

Bellevue CPA+John Huddleston has written extensively on tax related subjects of interest to small business owners. He is a graduate of Washington State University and the University of Washington School of Law.

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