Any savvy business professional understands the importance of maximizing deductions come tax time. Preparing well in advance and making sure to take advantage of every available opportunity to save will help you stay in compliance and keep as much money in your pocket as possible. As that time of year rolls around once again, we thought it might be helpful to provide a few tips and tricks for property managers during tax time. Take a look to see if there’s anything you might benefit from below.
Keep tabs on rental income.
If you own your own investment properties, it’s imperative that you keep accurate records of any and all monies received for rent. The government requires that this revenue be counted as taxable income. Keep in mind, also, that any rental income received in advance, even if it’s earmarked for a future year, must be reported in the year it was received. So, if one of your residents pre-paid for their 2-year lease, make sure you’re including all of that income in what you claim for this year.
Maximize your deductions.
Thankfully, the government provides a number of breaks to property investors to help minimize their tax burden. The following may possibly be used to offset income and lower the total you have to report (but you should always check with a tax professional to be sure):
- Home office (dedicated workspace in your personal residence)
- Property repairs
- Routine maintenance
- Mileage (as it relates directly to rental activity)
- Utilities paid for rental properties
- Some taxes and fees (i.e. local and/or property taxes, permits, inspection fees, employment taxes, etc.)
- Business-related travel expenses
- Insurance premiums
- Interest paid
- Operating expenses
- Legal and professional fees
Keep in mind that not all of these will be deductible for every landlord or property manager. Additionally, for those expenses that are applicable, the only way to effectively maximize them as deductions is to maintain accurate documentation. If you haven’t started yet, be sure to begin tracking these expenditures as you pay them. It’ll make things far less tedious when it comes time to file.
Let technology do the heavy lifting.
The good news is, you don’t have to physically or manually keep records of all of your income and expenses. With a tool like property management software, all the information you will need when it comes time to file should be readily available to you at the click of a button. Run income reports, list and total deductible expenses and more. No more worrying about missing an important document or over/underreporting revenue. You can have everything your accountant needs in just minutes.
Work with a professional.
Unless you have training and experience filing taxes on a business level, you’ll almost certainly benefit from the assistance of a tax professional. Whether you hire an in-house accountant or outsource to a contractor, having someone who is well-versed in tax laws, particularly as they relate to property investment, is a wise decision. Not only will it make things much easier for you, but it’ll also prevent potential errors or missed deductions that could prove quite costly in the long run.
What did we miss? Have you perfected the tax planning and preparation process and or developed a fool-proof system? If so, please consider sharing some advice and insight in the comments below. We’d love to hear it!