Tax Deductions for Vacation Rental Owners
How to Get More Tax Deductions for Rental Property Owners
Here are the Top Ten Tax Deductions for Vacation Rental Owners
1. Interest
2. Depreciation
3. Repairs
4. Local Travel
5. Long Distance Travel
6. Home Office
7. Employees and Independent Contractors
8. Casualty and Theft Losses
9. Insurance
10. Legal and Professional Services
So, did you know - You can rent out a vacation home tax-free, in some cases.
Many vacation rental owners go crazy during tax season, trying to gather the needed information on how much rent they collected the previous year. However, some do not realize that many of their expenses can be claimed as deductions, and that those should be calculated before April 15th as well.
There are many factors that must be considered to keep yourself out of trouble with the IRS when filing taxes and claiming deductions. Such things can be the amount of time you use your vacation home, how many nights you rented it out, and your personal income. For many vacation rental owners, it is easier to hire a tax attorney to handle all the complicated business that is income taxes.
To begin compiling all the necessary information for your second home, calculate your total gross rental income. This includes all the money you received, and kept, from your guests, whether it be through any of your fees (rental, cleaning, parking, pet, etc.) and any security deposits kept. Be sure NOT to include refunded deposits and sales tax.
Many of your expenses for your rental property can be at least partially, if not fully, deductible on your taxes. You at least want to gather the amounts of these expenses for your tax professional. Start with your mortgage, tax, and insurance related costs, and include property taxes, all forms of insurance, mortgage interest, homeowner’s fees and related costs.
Include all utility bills and the costs incurred for housekeeping, maintenance, repairs, cleaning supplies, travel expenses (to get to and from your rental), and your home office (based on the size of the room in your home that is used solely for your rental property business). Any advertising and home improvement you have done can also be deductible.
Any of the above costs that you attempt to claim as deductions must be for things that are only used in your vacation rental home. Tools that are used once in your rental then take up permanent residence at your primary home are not deductible. The same goes for things in your first home. Many of those things can be deductible on a “per usage” basis. For example, if you have a computer at home that you use only for listing and booking your rental, then it can be fully deducted. However, if it is only used half of the time for business and the other half for pleasure, you can only claim 50% of that expense. The same goes for cameras, cell phones, and anything else that have multiple purposes.
Don’t miss out on the federal income tax deductions available to vacation rental owners.
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