Deductible Rental Property Expenses: Insurance, Cleaning/Maintenance, and Repairs

Since you now are engaged in renting your property out to obtain profit, it is vital that you ensure that specific fees and professional services are properly set up and reported for taxation uses. We will take a look at some of these costs.

Insurance

Just as in the majority of monthly premiums, it’s usually prepaid upfront for a particular length of time. Scenario: You bought an insurance policy for the property in March 2012 for $1200. The coverage time span is from April 2012 to March 31, 2013. Be aware that in this illustration, the present tax year is surpassed by the insurance policy protection period. Consequently you should allot just current tax year relevant insurance premiums when it comes to this year’s taxes,and report the remainder for the next period. This could mean $900 (9 months April to Dec 2012) or $100 per month of qualified rental property utilization would be your permitted premium.

Please note that many Insurance companies frequently bundle insurance premium plans between business and personal customers for a discount rate. Just the company rental property relevant portion can be deducted. You should use your individual income tax return to deduct any non-business or private utilization. You will include Title insurance within the Cost Basis of the property, as it is not an applicable expenditure.

Cleaning and Maintenance

The daily maintenance of the rental property is a deductible expense provided it is for general spaces and routine cleaning. These types of expenses are also restricted to the days that are allowed rental property days rather than personal use days. A lot of rental property owners have deals with local area services to maintain the rental property on an ongoing schedule to make sure it is in running and functional order. This can include such expert services as window cleaning, dusting, cleaning home appliances and upkeep. Major structural repairs and alterations aren’t deductible, so must be listed in the rental property’s Cost Basis.

Repairs

From time to time, there might be some necessity to mend a home appliance, do a bit of painting, or any other undertaking that does not demand a serious renovation of the rental property structure. These expenses that are common and important are allowable in accordance with the leasing length of time.

Never include any time periods which would be looked at to be personal use days, since costs are only tax deductible in relation to the income of the rental property. The only expenditures which are authorized are the ones that are relevant to the approved leasing period, specifically.

  • On the IRS’s webpage, you will find the various reports that you need. If you want further information, see IRS Publication 527.

Renton CPA+John Huddleston has written extensively on tax related subjects of interest to small business owners. He is a graduate of Washington State University and the University of Washington School of Law.

Kirkland CPAAbout Kirkland CPA
Kirkland CPA+John Huddleston has written extensively on tax related subjects of interest to small business owners. He is a graduate of Washington State University and the University of Washington School of Law.

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