Save $$$ On Your Rental Income Taxes

Wednesday, September 08, 2010 @ 11:22 PM By: Beach Listings

When the economy is down, learn to cut corners the right way.  Are you taking advantage of all tax deductions available from your vacation rental?  Most people don’t have professional tax training and are likely not benefiting from every possible deduction.  For example, did you know that you can depreciate the value of your rental’s shrubbery? 

Any worthwhile accountant will advise you to print out your Schedule E Form, and deduct your mortgage interest, real estate taxes, repairs, and maintenance expenses.  But, one shouldn’t stop there; push your CPA even further.  Other important deductions include utility costs, homeowner’s association dues, auto & travel expenses, capital improvements, and other community dues (swimming area, racquet club, etc.).  Also, don’t forget to depreciate the value of your property (housing costs only, not the land).   

Before depreciating any assets, rental owners should also take deductions for all advertising costs and commissions.  This includes payments to local rental managers, or popular internet advertisers, such as BeachListings.com. 

Even more, there are a number of items off the beaten path that rental owners can depreciate, such as a new fence, furniture, appliances, etc.  The depreciation timelines vary, and one should consult an accountant before taking such deductions.  But, a few dollars here and there will add up in a hurry. 

We encourage you to explore every option and examine every taxable corner of your vacation rental because every deduction counts; if not now, then maybe next year.  That’s right - If your property falls under the IRS definition of “rental property,” you can carry your losses, exceeding gross income, forward to the next taxable year. 

Furthermore, for those select few who rent their vacation property for two weeks or less in a year, the IRS considers this tax-free, non-rental income.  The downside here though is no deductions are allowed for your rental expenses.  But, what’s better than tax-free income?  That ranks right up there with a free lobster dinner and a long, lazy day on the beach.  Beach Listings wants you to get the most out of your CPA, especially in this economic recession. 

You are probably asking yourself “What should I do with all of these savings on my taxes?”  Great question; it’s a perfect time to use it and join the Beach Listings community.  Sorry, we just couldn’t help the self-promotion.  More importantly, though, now is not the time to over-pay Uncle Sam!  Learn to cut corners the right way. 

Beach Listings does not claim to possess tax expertise, or to offer tax advice, but seeks to encourage rental owners to self-educate.  If you would like more information or verification, please refer to IRS Publication 527 or IRS Tax Topic 415, and always contact your personal accountant.