It’s unfortunate that many Las Vegas landlords end up paying more in taxes than they actually need to. With tax laws always in flux and so many tax deductions to consider, it’s hard to stay on top of everything you need to know when tax season rolls around. When it comes to paying taxes on your Las Vegas rental properties, there are several tax deductions that landlords should know about. This way you won’t overpay and can benefit the most from your business expenses when filing your taxes.
Interest
There are many types of interest a landlord may be able to claim as a deductible expense. For the most part, there will always be mortgage interest on the property. This is usually the largest tax-deductible expense for a landlord. However, there’s also interest on a refinanced mortgage, loans taken out for repairs or to make improvements, and credit card interest on purchases used for the rental property. These should all be included in a landlord’s tax deductions on top of the usual mortgage interest write-off.
Repairs
All landlords know that repairs to rental properties are inevitable. Sometimes these repairs can be very costly and are financially devastating. Luckily, rental property repairs are tax-deductible in the year the repair took place and should always be among the tax deductions a landlord claims. It’s important to note that only repairs to the property, not improvements/property “upgrades”, qualify for a deduction.
The definition of a repair (for tax purposes) is an effort to maintain the current condition of the property. This can include painting, plumbing repairs, air conditioner repairs, and patching up holes or spots. Additionally, landlords can also claim expenses related to the rental of tools and equipment, as well as labor costs.
Depreciation of the Property
When it comes to Las Vegas real estate, the value of the property (not the land) does not stay the same year after year. Because of wear and tear, the value of a rental property will decrease with time. This is what is referred to as depreciation. Las Vegas landlords are able to deduct the perceived decrease in the value of their property the same way as they would an expense. This amount reduces the landlord’s taxable income.
Depreciation of Assets
Much like the depreciation of a rental property itself, landlords can also deduct the depreciation of their assets. If large purchases are made, such as computers or equipment, the cost is not deducted as a whole all at once. Instead, landlords can claim depreciation of these assets over time each year.
Travel Expenses
A landlord’s responsibilities often involve a lot of driving, especially if there are multiple rental properties to manage. If a tenant has a complaint or something needs to be inspected, a landlord can either claim the cost of gas or calculate the mileage as a travel expense. Which method is used depends on how the landlord first claims this deduction. The following tax filings should use the same deduction method for travel expenses as the previous year. Landlords can also include the cost of travel that is related to repairs of the rental property. Again, these expenses must be for repairs, not for improvements/upgrades to the rental property.
Home Office and Operating Expenses
For landlords who conduct their business from home, you can claim office and operating expenses when filing your taxes. However, you must be very careful not to take advantage of this deduction as the IRS can be very strict on this particular area. It’s important to keep records of all your office expenses, including paper, printer ink, phone bills, and other office items. It’s also important to make sure you meet the minimal requirements to claim this deduction.
Insurance Premiums
Las Vegas landlords should know that all insurance premiums related to their business are considered tax-deductible by the IRS. Coverage for the rental property, such as flood, fire, and theft insurance, qualifies for this deduction. If you are unsure whether or not the insurance is business-related, it’s best to verify before claiming it to avoid any trouble with the IRS.
Payment to Independent Contractors
Some landlords don’t realize that paying independent contractors, not just employees, can be deducted as a business expense. The wages paid to a regular employee are tax-deductible, as well as payment to a contractor for services done on the property. This can be a plumber, electrician, painter, or handyman.
Property Management Fees
One of the many benefits of hiring a Las Vegas property management company is being able to claim that expense as a tax deduction at the end of the year. Landlords often need help running their businesses, especially when it comes to managing tenants, collecting rent, marketing rental properties, screening applicants, and handling maintenance and repairs. Landlords can deduct these fees as an operating expense.
The key to filing taxes quickly and painlessly is to keep impeccable records of your business expenses and to have everything organized well before the tax deadline. The Black & Cherry property management team offers accounting services to help Las Vegas landlords stay on top of their finances. Our experienced property management team is ready to help with whatever you may need when it comes to managing your rental property. Contact Black & Cherry today to learn more!
