As you gather paperwork, locate your receipts, and identify all the forms you need to fill out to prepare your taxes, here are five key tips for tax season for western North Carolina homeowners.
5 Important Tips for Property Owners During Tax Season
1) Make Sure You Report Income.
There are many categories of taxable income you must report. They include but are not limited to:
- All rental income from tenants
- Any security deposits that are not returned
- Payments for canceled leases
- Any expenses paid by tenants in lieu of rent
Do not forget to report income to avoid potential audits and fines.
2) Rental Assets Depreciate.
While we typically think of homes as investments that increase in value continually over time. However, rental property is a business asset like a piece of machinery; therefore, for property tax purposes it will depreciate over time. You can likely deduct the depreciation of your rental property every year; however, you may need help determining exactly how much is available for deduction.
3) You Can Often Deduct Property Taxes
Property taxes are often deductible from your income tax burden. There is typically a $5,000 or $10,000 limit to the amount of property taxes you can deduct.
4) You Can Deduct Repairs.
There is a difference between what is considered a repair and what is considered an improvement. A home improvement is subject to taxation, while a repair is considered a deductible expense. Repairs typically include:
- Repairs made to floors and walls
- Roof patches and shingle replacement
- Repairs made to plumbing pipes
- Replacing parts within an HVAC unit or large appliance
- Anything that is patched rather than replaced
Home improvements that must be capitalized include:
- Additions such as new bedrooms
- New decks or porches
- New windows or the addition of storm doors and windows
- New HVAC systems and appliances
- New water heaters
- New roofs
- New security systems
- Installation of landscaping and sprinklers
Keeping track of all repairs can help offset the tax burden of improvements. A property management company can help ensure you keep up with all your receipts for repairs.
5) Property Management Expenses Can Be Deducted.
Some take advantage of property management services, while others avoid property management because they are concerned that the extra fence will hurt their bottom line when it comes to rental property. You may be concerned that it will simply be too expensive to bring on the help of a professional service when the margin is already so thin. There are a number of reasons, however, hiring a property management service may be the best thing for your budget and potentially tax-deductible:
- Advertising and marketing your vacant property
- Maintenance and repairs for your property
- The cost of preparing contracts and background checking potential tenants
- Any other services that result in expenses
When it comes to property management, you can benefit from tax-deductible expenses and from the amount of time and energy you will save. For what usually amounts to $100.00-$200.00 per month, you can outsource all of the responsibilities related to managing to us. In addition to the time you save, you will benefit from the peace of mind of knowing someone is always looking out for your property and your tenants.
Asheville Phoenix Properties is here to help Asheville area property owners get the most out of their experience. This area is a great place to own property. The region continues to experience substantial growth in both new residents and new businesses. Asheville Phoenix Properties is here to help you achieve your property management goals. If you’d like more information about our property management services, please contact us.