If you own a rental property in Dallas, Texas, you probably know how taxes, maintenance costs, and other expenses can eat into your profits. Hiring a professional property management company can be a major stress-reliever, but it is still important to understand the legal details of your taxes and the money you could be saving. These tax tips listed below will show how it is possible to make even more profit from your rental investments.
1) Use technology to keep records of all possible deductions
Many ongoing expenses, such as maintenance and cleaning, legal costs, insurance premiums, advertising, and mortgage interest, can be considered tax-deductible. For many property owners or small business owners, keeping track of those expenses can be a major headache. Fortunately, there are many useful and effective business expense tracking apps available to make it easy to capture receipts, invoices, expenses, and more. Many of these apps are easy to use and can integrate into your accounting software.
2) Understanding the limits
There are exceptions and limits indicated on the IRS tax code. For example, when it comes to claiming travel expenses. You can’t write off the entire amount if you are traveling outside your local area, regardless of the reason. However, travel in your area can be included, whether for collecting rent, showing your rental property, or doing essential repairs.
3) Repairs or Improvements? Know the difference.
If you make improvements, you can only get the cost back over several years through depreciation. An improvement would be replacing the entire window if one pane is cracked. In that case, part of the expense can be written off in the current year, while you can write off the balance of the cost during the next few years. However, if the cracked pane is simply repaired or just the one pane is replaced, without putting in an entirely new window, you can write off the full cost in the current year.
4) Claiming net loss
You can reduce your income tax liability by claiming a net loss after all applicable depreciation and qualifying expenses have been written off. Talking to an expert tax advisor is recommended at this point, as the amount you are able to claim on rental income as a net loss is subject to various guidelines and rules.
If keeping track of expenses, staying on top of current laws, collecting rent, as well as the many other time-consuming tasks of managing your own rental property is too much, our team at Specialized Property Management Dallas is here to help! Our property management system will provide you with:
- Online owner access to financials, maintenance, and monthly reports
- Online tenant rent collection
- Easy ACH/direct deposit for owners
- Tenant incentives for on-time rent
- Professional collections
- Monthly independent CPA audits on all owner trust accounts
- Audited year-end financials & owner 1099 preparation
- and much more…