Investing in rental property can be a smart financial move. Rental property can provide a steady source of income while enabling landlords to build equity. However, one of the biggest tasks most landlords face is preparing their taxes. Fortunately, there are several rental expenses landlords can deduct from any rental income they receive that can help lower their overall tax liability.
If you own a rental property in Brevard County, you must report any rental income you receive when you file your annual tax return. In this article, we’re taking a look at some important things Brevard County landlords need to know about taxes.
What Is Rental Income?
According to the IRS’s guidelines, rental income is any payment a landlord receives from the tenants in their rental property. This includes but is not limited to:
- Rent payments
- Advanced rent payments
- Fees paid to a landlord for lease cancellation
- Any expenses covered by your tenant
- Services received in exchange for rental payments
Nobody likes paying taxes, but it’s important that you keep records to help accurately report any rental income you receive. Many landlords find taxes overwhelming. Fortunately, an experienced property manager can help you stay on top of your rental income and expenses to ensure you have the correct documentation to maximize your tax savings.
Important Records Landlords Must Keep
Keeping accurate and thorough documentation makes tax season much easier for landlords. When operating a rental business, it’s important to keep records of the following:
- Leasing agreements
- Receipts of rent received
- Record of marketing costs
- Record of property management costs
- Insurance policies
- Mortgage paperwork (if applicable)
- Record of mortgage interest paid
- Record of any legal fees incurred
- Property title documents
- Record of previous tax filings
Although this may sound overwhelming, an experienced property management company can help you keep track of necessary documentation. At Rent in Brevard Property Management, we provide monthly comprehensive accounting statements that make it easy for our landlords to keep track of their finances.
Tax Deductions for Brevard County Landlords
Landlords are eligible to claim certain (IRS) deductions. Utilizing allowed deductions can help you save money when filing your taxes. Your property manager can advise you on the tax deductions available to landlords, including:
- Maintenance Costs – All properties will need maintenance at some point. The IRS states that essential repair fees are deductible in the year you complete them and incur the expense. Some essential repairs include repairing roof damage, replacing flooring, repainting, replacing AC units, and repairing most damage caused by tenants.
- Insurance costs – Many insurance premiums you have for your rental property are deductible from your taxes, including landlord liability insurance and flood insurance. It’s also possible to deduct certain insurance expenses you incur as a landlord.
- Rental property depreciation – Rental property depreciation enables you to deduct the costs of buying and improving your rental unit over its useful life. For a property to be eligible for depreciation, you must own it and use it as an income-producing asset. It must also have a determinable useful life and be expected to last for at least 12 months.
It’s important to note that tax laws can change periodically, so staying up-to-date is crucial. To learn more about allowable rental deductions, speak to your Brevard County property manager or your tax accountant.
Property Managers in Brevard County
Understanding tax deductions is essential for Brevard County landlords. A trusted and knowledgeable property management company can provide you with organized financial records that will help make tax season a breeze.
At Rent in Brevard Property Management, we offer comprehensive property management services that make it easy to keep on top of your rental portfolio. From marketing your property and sourcing reliable tenants, to collecting rent and maintaining bookkeeping records, Rent In Brevard Property management is here to help you maximize your profit and streamline your rental business.
To learn more about our property management services, click here.