Turbo Tax Tips
Turbo Tax will walk you through the process of reporting your rental income to the IRS. They have a posting on Real Estate Tax and Rental Property at the previous link. They promise to “help you with deductions, depreciation, and getting your biggest possible refund.”
You are, of course allowed to reduce your rental income by subtracting expenses incurred to get your property ready to rent, and then to maintain it as a rental. This is reported in the Schedule E, Supplemental Income and Loss, which is filed with your Form 1040 Income Tax Return. They provide a list of deductible expenses that include:
- Advertising
- Cleaning and maintenance
- Commissions
- Depreciation
- Homeowner association dues and condo fees
- Insurance premiums
- Interest expense
- Local property taxes
- Management fees
- Pest control
- Professional fees
- Rental of equipment
- Rents you paid to others
- Repairs
- Supplies
- Trash removal fees
- Travel expenses
- Utilities
- Yard maintenance
However, there are limitations on how much you can use your rental property and still accumulate a loss. If you want the chance to fully deduct losses, your personal use of the place can’t exceed 14 days or 10% of the days the unit is rented during the year, whichever is greater.
All expenses you deduct must be ordinary and necessary, and not extravagant. You can deduct the cost of travel to your rental property, if the primary purpose of the trip is to check on the property or perform tasks related to renting the property. If you mix business with pleasure, though, you’re required to allocate the travel costs between deductible business expenses and nondeductible personal costs. Travel expenses are deductible if, for example, the primary purpose of the trip is to clean and paint the unit. If during a five-day visit to the rental property, you spend three days cleaning and painting and two days at the pool,. While this appears to allow you to deduct 60 percent of travel costs, the full cost of transportation to and from your southern home is deductible. It’s just the costs while there that need to be allocated between business and personal expenses. Another tax law restriction limits your deduction for business meals to 50% of the cost.