Last modified on January 7th, 2016
By Aimee Miller
Many property owners find themselves managing a property where the landlord might not have entered the rental market as a professional. Many rent out rooms and homes in order to keep up with mortgage payments. Even if the owner has entered into the rental industry as a newbie, they can still reap the tax rewards. As a property manager, it is important to keep owners informed of all of the benefits of renting out a property.
Record Rental Income
When dealing with a new rental owner, property managers should stress to their clients just how they should record their rental income. If an owner is only renting out a room in their home or any other space for 14 days or less, they don’t need to report it to the IRS. However, most landlords rent to residents beyond 15 days. This income must be reported in the Schedule E: Reporting Rental Income and Loss form.
Keep Track of Rental Expenses
Landlords often need property managers to keep track of all of their expenses for the property. This is important, as these expenses are tax deductible. Property managers should keep detailed records of all expenses incurred relating to the property. From clean-up and fix-up expenses to advertising costs incurred to rent a property, managers should file these expenses away for tax purposes.
Factor in Depreciation
Many rental properties require money for depreciation costs. Property managers need to record these costs that are associated with keeping up a residence. Many landlords and managers must purchase new appliances and furniture for properties. These costs can be deductible. Depreciation looks at how much the owner paid for the property, not how much the current market value may be.
Know that Losses Can Come Along with Tax Audits
Property managers assisting new landlords need to make sure the owner understands that in many cases with expenses and upkeep of rental properties, a loss can come as a result. However, a loss due to a rental property can help lower tax liability and in turn result in a bigger tax refund. At the same time, property managers should remind owners that business rental properties face a higher chance of being audited. By keeping stellar records of deductions, the landlord won’t have to worry if this occurs.