Many people are surprised to learn that the average house in the US costs around $507,000. Due to rising property values, now is an amazing time to pursue rental property ownership. Owning a rental property often comes with various expenses.
Not everyone knows if they can deduct them from their taxes, either. Wondering "Can I deduct remodeling expenses for a rental property?" The guide below will explore the key information you need to know before moving forward.
Repairs vs Improvements
Not all remodeling expenses are immediately deductible. The IRS distinguishes between repairs and improvements. Repairs include fixing leaks, repainting, or repairing broken windows.
These are deductible in the year they are completed. Improvements, such as a new roof, extensive renovations, or adding new rooms, must be depreciated. This means you deduct a portion of the expense each year over the useful life of the improvement.
Maximizing Remodeling Tax Benefits
To maximize your remodeling tax benefits, categorize your expenses correctly. Keep detailed records of all improvements, including receipts and descriptions.
Consult with a tax professional to ensure you're following the correct depreciation schedules. They will also help you take full advantage of the tax benefits available to you.
Rental Property Expense Claims
When filing your taxes, list your deductible expenses and improvements on Schedule E of Form 1040. Repairs go directly into the 'repairs' section. Improvements are listed as assets and depreciated.
Properly claiming these expenses can reduce your taxable income. In many cases. This results in significant tax savings over time. Keep this in mind as a landlord.
Getting Started
The best way to handle this obligation is by working with a professional. Property management companies know how to navigate this process. Let's explore the key information to consider.
Check Credentials and References
Verify a property manager's credentials to ensure they understand rental property tax deductions. Ask for references to gain insight into how they work for other clients.
This can help you avoid issues with property improvement tax savings. Browsing online feedback is another solid method as long as you keep an eye out for fake reviews.
Evaluate Management Services
Assess the services offered by potential managers. Ensure they can manage deductible renovation costs effectively. A good property manager will also handle rental property expense claims, saving you time and stress.
Compare Fees and Contracts
Review the fees and contracts of different property managers. Make sure their fees align with the services provided.
Consider their impact on your property improvement tax savings, as well. Transparent contracts should detail all deductible renovation costs. This will help you avoid potential issues.
So, Can I Deduct Remodeling Expenses for a Rental Property?
The answer to "Can I deduct remodeling expenses for a rental property" is "sometimes." To deduct your remodel, you'll need to depreciate improvements over time. Working with an accountant or property management professional can help you determine the best course of action.
Renters Warehouse provides comprehensive property management services in Virginia. Our team ensures high-quality tenant placement and 24/7 maintenance support.
Since 2007, we've helped owners maximize their rental income and simplify their roles. You'll learn more about how we can help when you schedule a consultation today.
