Cash in on Tax Deductions for Your Rental Properties

landlord real estate agent rental property tips

Cash in on Tax Deductions for Your Rental Properties

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Tax season is close at hand, but are you prepared? Before you start rushing to see if you’ve saved all your receipts, take some time to review what common rental property deductibles you can utilize this tax season. With just a few minutes you’ll save time and money with your organizational and tax-savvy prowess.

Check Off These Tax Deductions

As you already know, rental income is taxable. Whether or not you think Park and Recreation’s Ron Swanson’s tax joke is funny, if you own a rental property you still have to complete tax form 1040, Schedule E. That being said, you can reduce your rental income on your taxes by subtracting expenses made when getting your property ready to rent and for maintenance. According to the IRS, common deductible rental expenses are:

❐ Advertising and Tenant Screening

❐ Travel expenses

❐ Cleaning and maintenance

❐ Commission

❐ Depreciation

❐ Insurance

❐ Interest (other)

❐ Legal and other professional fees

❐ Local transportation expenses

❐ Management fees

❐ Mortgage interest paid to banks

❐ Points

❐ Rental payments

❐ Repairs

❐ Taxes

❐ Utilities

While this might seem pretty self-explanatory, when it comes to taxes nothing is totally clear-cut. For example, the way you record improvements is different than you would record repairs. According to TurboTax®, property improvements (like adding a swimming pool) are generally capitalized and depreciated over several years, not deducted the year you paid for the service. Repairs (like painting), on the other hand, can be immediately written off the year you paid for them. If you need to calculate depreciation for your rental (on Form 4562), TurboTax® gives a good guide. Of course, the IRS has a full explanation on property depreciation.

Another tricky deductible can be travel expenses. If you’re using your personal vehicle for rental activities then you can deduct the portion that you use for business purposes. Typically most businesses apply a per-mile rate to the total business miles they had in that year. For 2015, the IRS has set that mileage rate at 57.50 cents per mile. However, if you believe you can get a better deductible, according to TurboTax® you can take the percentage of your business miles you’ve accumulated and then apply that percentage to your total vehicle costs (gas, insurance, repairs, etc.). While this method might be beneficial, that being said, you’ll need to have immaculate records to justify your final deductible. So tread lightly.

In addition to claiming travel expenses, you can also deduct your home office as long as it’s dedicated to your business. You can base your business deduction on the home office’s sq. footage divided by your house’s sq. footage or by how many rooms your business encompasses versus your house’s total number of rooms. The IRS allows you to use a prescribed rate to calculate your deduction. For 2015, the prescribed rate is $5 per sq. foot with a maximum of 300 square feet.

Tax Organization Reminders

You know the drill; if you make a claim, you have to back it up. Otherwise, if you’re audited, you might suffer huge losses from additional taxes and penalties. And let’s hope you take getting served as well as Ron Swanson did.

The IRS urges you to keep good records of your rental property, especially of rent and rental repairs. Using documentary evidence like receipts, cancelled checks, or bills are vital to keeping good records for this tax season and beyond. To do all this, William Perez, a tax practitioner in San Francisco, suggests using spreadsheets to keep track of the following things:

  • Purchase price of the rental
  • Accumulated depreciation and current annual depreciation
  • Rental income
  • Security deposits received and reimbursed
  • Advertising costs
  • Cleaning, maintenance, and repair costs
  • Homeowners insurance and HOA dues
  • Real Estate taxes and mortgage interest expenses
  • Utilities, landscaping, garbage, travel, and other expenses

This might seem like a lot, but it’s well worth establishing these recording habits now than end up in trouble later. When it comes to what to do with all your receipts, consider investing in a lockable filing cabinet, a scanner, or using a Smartphone receipt app to take a photo and track. With these three things, you can start storing your receipts physically and digitally. You should have a digital copy of your receipts for up to 6 years. Mark J. Kohler suggests when you first get a receipt, write down notes on their business purpose that day. Relying on credit-card statements and canceled checks to tell you what you bought in October usually isn’t sufficient enough to jog your memory.

While you might dread doing your taxes, as long as you keep thorough documentation and good organizational habits, you can survive. When you’re ready to start tackling your taxes, use the IRS’s list (at the top) as a guide to make sure you leave no possible deductible untouched. As time consuming as it is, you’ll be happy once it’s all said and done and you have that big tax refund check in hand. Go ahead and treat yo’ self.

What are some ways you get ready for tax season? What deductibles do you tend to utilize the most? Leave a comment down below.

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Can Your Tenant Legally Own An Alligator As An Emotional Support Animal?

When you think of an emotional support animal, what comes to mind? It would be fair to assume the first thought to enter one’s head would be a dog, if not some kind of bipedal mammal — and most likely not a reptilian carnivore with razor-sharp teeth.

In enters WallyGator: a five-and-a-half foot, 70-pound TikTok famous alligator with over 72,600 followers on the platform owned by Philadelphia, Pennsylvania native Joie Henney. While it is legal to own alligators in Philadelphia, that isn’t the case in many other states — nor is it likely that the majority of pet gators, if any, qualify as emotional support animals. Or is it?

Since Wally’s uptick in popularity on the internet back in August, “alligators” as a related topic to the Google search query “emotional support animal” has seen a 300% increase in search frequency, most likely for the purposes of curious internet users seeing and reading about WallyGator for themselves. However, with the increase in popularity of keeping various species of reptiles as house pets and the common need for emotional support animals, it isn’t beyond the realm of possibility that people with legitimate mental health conditions, unique cases of PTSD, or related conditions could be looking into obtaining a support gator of their own.

As we’ve previously covered, the Department of Housing and Urban Development (HUD) has provided guidance on how the Fair Housing Act (FHA) interfaces with the ADA (Americans with Disabilities Act) regarding emotional support animals. HUD classifies assistance animals into two different categories in order to distinguish their roles from one another: service animals (primarily dogs), and other trained animals that do work, perform tasks, and/or provide therapeutic emotional support for individuals with disabilities. Per HUD’s guidelines, because Wally is not a dog, he, therefore, cannot qualify as a service animal – so, how does HUD define Wally and his role, exactly?

HUD states if the service animal status is not readily apparent, to limit inquiries to two questions: “Is the animal required because of a disability?” and “What work or task has the animal been trained to perform?”, and if the answer to either question is no, then following denial of service animal status under federal, HUD states that the animal can still qualify as a support animal or other assistance animal, depending on what needs to be accommodated.

In Wally’s case, Henney received approval to use him as a support animal after expressing to his doctor he did not want to be medicated for depression following the deaths of several family members and close friends in a short period of time, and more recently, his untimely cancer diagnosis. Even before rescuing and adopting Wally, Henney has worked with and rescued reptiles (particularly alligators) for over thirty years, and his vocation is one he is very passionate about – so it stands to reason his support animal of choice would be one he’s so accustomed to working with.

Because the ADA makes the same distinction that an emotional support animal would only be classified as such due to its mere presence providing comfort as opposed to employing any training to respond to a situation, HUD’s guidelines technically, but clearly grant Wally his status as a legitimate emotional support animal under federal law.

While Wally’s status is protected in the eyes of the law, HUD also states that a housing provider can refuse a reasonable accommodation request for a support or assistance animal if said animal poses a direct threat to the health or safety of other individuals or would result in substantial physical damage to the property of other which cannot be reduced or eliminated. However, before denying such a request due to a lack of information, a housing provider is encouraged to engage in a “good-faith” conversation with the owner of the support animal to gather information about the animal and mitigate any potential misunderstandings regarding its purpose.

Luckily for most property owners, WallyGator is very much an anomaly, and most folks aren’t scrambling to obtain an emotional support gator of their very own, anyway. Henney himself calls Wally a “very special gator” (he’s trained Wally to understand commands and to keep his mouth closed around other people) and actively discourages others to adopt a pet alligator if they’re not actively predisposed to working with alligators, stating “if you don’t know what you’re doing, you will get bit”.

Check out ApplyConnect’s HUD guidance breakdown: https://www.applyconnect.com/wp-content/uploads/2020/02/Emotional-support-animals_-HUDs-Guidance-cliff-notes-AC-Version.pdf

Read More »

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Tenant Screening

Can Your Tenant Legally Own An Alligator As An Emotional Support Animal?

When you think of an emotional support animal, what comes to mind? It would be fair to assume the first thought to enter one’s head would be a dog, if not some kind of bipedal mammal — and most likely not a reptilian carnivore with razor-sharp teeth.

In enters WallyGator: a five-and-a-half foot, 70-pound TikTok famous alligator with over 72,600 followers on the platform owned by Philadelphia, Pennsylvania native Joie Henney. While it is legal to own alligators in Philadelphia, that isn’t the case in many other states — nor is it likely that the majority of pet gators, if any, qualify as emotional support animals. Or is it?

Since Wally’s uptick in popularity on the internet back in August, “alligators” as a related topic to the Google search query “emotional support animal” has seen a 300% increase in search frequency, most likely for the purposes of curious internet users seeing and reading about WallyGator for themselves. However, with the increase in popularity of keeping various species of reptiles as house pets and the common need for emotional support animals, it isn’t beyond the realm of possibility that people with legitimate mental health conditions, unique cases of PTSD, or related conditions could be looking into obtaining a support gator of their own.

As we’ve previously covered, the Department of Housing and Urban Development (HUD) has provided guidance on how the Fair Housing Act (FHA) interfaces with the ADA (Americans with Disabilities Act) regarding emotional support animals. HUD classifies assistance animals into two different categories in order to distinguish their roles from one another: service animals (primarily dogs), and other trained animals that do work, perform tasks, and/or provide therapeutic emotional support for individuals with disabilities. Per HUD’s guidelines, because Wally is not a dog, he, therefore, cannot qualify as a service animal – so, how does HUD define Wally and his role, exactly?

HUD states if the service animal status is not readily apparent, to limit inquiries to two questions: “Is the animal required because of a disability?” and “What work or task has the animal been trained to perform?”, and if the answer to either question is no, then following denial of service animal status under federal, HUD states that the animal can still qualify as a support animal or other assistance animal, depending on what needs to be accommodated.

In Wally’s case, Henney received approval to use him as a support animal after expressing to his doctor he did not want to be medicated for depression following the deaths of several family members and close friends in a short period of time, and more recently, his untimely cancer diagnosis. Even before rescuing and adopting Wally, Henney has worked with and rescued reptiles (particularly alligators) for over thirty years, and his vocation is one he is very passionate about – so it stands to reason his support animal of choice would be one he’s so accustomed to working with.

Because the ADA makes the same distinction that an emotional support animal would only be classified as such due to its mere presence providing comfort as opposed to employing any training to respond to a situation, HUD’s guidelines technically, but clearly grant Wally his status as a legitimate emotional support animal under federal law.

While Wally’s status is protected in the eyes of the law, HUD also states that a housing provider can refuse a reasonable accommodation request for a support or assistance animal if said animal poses a direct threat to the health or safety of other individuals or would result in substantial physical damage to the property of other which cannot be reduced or eliminated. However, before denying such a request due to a lack of information, a housing provider is encouraged to engage in a “good-faith” conversation with the owner of the support animal to gather information about the animal and mitigate any potential misunderstandings regarding its purpose.

Luckily for most property owners, WallyGator is very much an anomaly, and most folks aren’t scrambling to obtain an emotional support gator of their very own, anyway. Henney himself calls Wally a “very special gator” (he’s trained Wally to understand commands and to keep his mouth closed around other people) and actively discourages others to adopt a pet alligator if they’re not actively predisposed to working with alligators, stating “if you don’t know what you’re doing, you will get bit”.

Check out ApplyConnect’s HUD guidance breakdown: https://www.applyconnect.com/wp-content/uploads/2020/02/Emotional-support-animals_-HUDs-Guidance-cliff-notes-AC-Version.pdf

Read More »

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ApplyConnect marks used herein are trademarks or registered trademarks of applyconnect.com. Other product and company names mentioned herein are the property of their respective owners.

Get Started with ApplyConnect!

The nation’s most trusted tenant screening for real estate agents, landlords, and property managers. No cost background checks available 24/7.

©2018 ApplyConnect. All rights reserved

ApplyConnect marks used herein are trademarks or registered trademarks of applyconnect.com. Other product and company names mentioned herein are the property of their respective owners.