Tax Season Tips for Landlords

Tax Season Tips for Landlords

April 14, 2022

Tax Season Tips for Landlords

Tax season is a busy time for everyone, but especially for rental property owners. It’s your duty to declare the rental income you received on your tax return form. Rental income is referred to by the IRS as payment received from renting out your real estate. This covers:

  • Regular rental paid amounts
  • Advanced rental paid amounts
  • Security deposit payments
  • Amount paid by tenants when canceling a lease
  • Amount paid by tenants for expenses
  • Received services or property in lieu of money for rent

Both new landlords and old landlords can find accounting for taxes to be complicated. With so many things to consider such as increasing rent rates and expiring eviction moratoriums, it’s more vital than ever to learn tax savings and capitalize on the deductions.

Here's a guide to taxes for landlords! It can help maximize your refunds so you can retain a better portion of your income.

Main Tax Deductions for Landlords

As a landlord, being aware of tax deductions helps you keep more of your money. There are several IRS deductions that you can claim. They can include the following:

Rental Real-Estate Property Depreciation

There’s a way for landlords to recover their property investments by calculating the depreciation, should that occur. Over a long period of time, landlords are permitted to deduct a part of the property’s cost.

Insurance Premiums

When you buy your rental home, property insurance is among the costs you’re expected to pay. You’re allowed to make premium deductions. This can refer to landlord liability insurance or flood insurance. It’s acceptable for landlords to make deductions on the insurance coverage payments.

Repair Charges

Owning a rental means being exposed to property damage. This can be due to negligence or normal wear and tear. Be that as it may, rental property repair fees are counted as deductibles in the year of completion.

rental property repairs taxes

Remember that repair deductions must be from necessary repairs and reasonable in cost. They can include:

For your rental unit, you’re allowed to claim deductions on these, among others.

COVID Resources

With the pandemic, property owners have had to make huge adjustments in terms of incorporating social distancing practices. They had to implement virtual property showings and incorporate technology as much as possible. Monitoring moratorium regulations is another thing they had to pay attention to.

The uncertainties faced by landlords regarding rental rates and turnovers are still existing despite the pandemic situation. On average, landlords who own a small property just made half of the normal rental income during the time of the pandemic, as stated by the Harvard Center for Housing Studies.

In 2021, a COVID-19 relief package was given, reaching $25 billion as part of rental assistance. It permits landlords to make funding applications in the interest of their renters. You can check out to gain more resources on tax return assistance for this.

Essential Records Landlords Need During the Tax Period

To make the process of tax deduction claims faster, landlords must have accurate records on hand. When your landlord records are well-kept and in order, the stress you feel in the busy tax period is considerably reduced. You can easily get ahold of your receipts, check on your tax-deductible costs, and ready your tax returns.

tax deductions rental property

You should have these records prepared:

Additionally, as a property owner, you also need to have short-term records. This refers to income and expense documents of the recent past tax year. This covers the following:

It may look like a great number of records must be available and stored. But these are crucial documents that help property owners during the busy tax period. Having them within easy reach is worth the effort and lowers your stress. It also makes filing taxes go smoother.

Filing Taxes Based on Ownership Status

Depending on how you own your rental property, there’s a proper way to file taxes on it:

Individuals Who Own the Rental Property

For those who own the rentals themselves, they can proceed to file IRS Schedule E, Supplemental Income and Loss to report their rental income and expenses.

Co-Owners of the Rental Property

Co-owners are required individually to report each of their income shares and list the rental property deductions on each of their own tax returns. They can use the IRS Schedule E, Supplemental Income and Loss.

rental property taxes two owners

For partners, the owner’s share is reflected on the ownership interest which is found on the property deed.

Business Entity Owning the Rental Property

For business entities owning the rental unit, the IRS Form 8825, Rental Real Estate Income and Expenses of a Partnership or an S Corporation must be used for income and deductions reporting. Subject to the category of the business entity, there may be more filing requirements to accomplish.

Bottom Line

Landlords don’t have to be stressed during the tax season. They can seek the help of a tax professional. Another great alternative is to hire a committed property management company. They can assist during tax season and provide a systematic financial reporting system.

You can avoid financial losses and take advantage of tax deductions. Moreover, on top of vital record-keeping, a property management firm offers property landlords a full range of services such as marketing, tenant screening, property maintenance and rent collection.

If you’re looking for a property manager, consider the top one in Jacksonville, Innovative Property Solutions!

Innovative Property Solutions

8833 Perimeter Park Blvd Suite 301, Jacksonville, FL 32216

(904) 321-9020

Office hours:

Mon - Fri: 9:30am - 5:00pm

Sat - Sun: Closed