Property Management + Tax Deductions

 Why Property Management Fee Is a Tax-Deductible Expense

When you own a rental property, the responsibilities include purchasing monthly rent and paying the required building expenses. You are also supposed to screen prospective tenants, maintain the property as per the law and address any complaint. Managing a rental property is a tedious job. Consequently, it would be best to hire a property manager.  In case you opt to hire one, this is automatically an added expense, but it also qualifies for legitimate deduction when paying your taxes.

Rental Property Deduction

There are numerous categories for rental properties. In most cases, some deductions are in full cost expense, and others depreciate over time like capital improvements.  Some maintenance expenses are categorized as full cost expenses: repairing broken windows and patching walls.  Capital expenses refer to those that enhance the value of your home. Moreover, the state should write off full administrative expenses such as hiring a property management and advertising your property.

Schedule E

On this schedule, you are supposed to report your rental income, expenses, and depreciation.  In case you have numerous properties, you can file more than one schedule to document all the properties you own. Eventually, you should add the totals and list them on a single form. In case you had hired property management services, you should deduct their expenses on this form.

Schedule C

In case you offer laundry services, maid service, or regular house cleaning, you should file Schedule C. If you had contracted a property management service to provide these essential services, you should deduct those expenses from Schedule C.

Property management services expenses are tax-deductible.  Nevertheless, to claim the entire cost of services, you should safely keep statements and invoices from the property management company. Such documents are evidence that makes the tax deduction eligible. Ultimately, hiring a property manager will make your work easier and offer you a few tax advantages.

How Often Should You Visit Your Properties?

 

With Property Managers, When is Visiting Your Property Too Much?

Inspecting your property is essential and a personal decision depending on the kind of property you are renting, the type of tenants you attract and the type of relationship you want to establish with your tenant. Property inspections will help you assess the home's condition and manage any repairs early enough to avoid extra costs.

Depending on your preferences, you may want to watch your property closely, even when you have a property management service, or may prefer to be hands-off, especially when you are renting a property in another state. Read on to learn how to handle your rental investment properties.

How Often Is Enough? 

A couple of early visits help you know the kind of tenants living on your property. Mismanaged property inspections could irritate the tenants, and the last thing you and the property managers want to do is get rid of responsible tenants. In most cases, rental property inspections happen once every sixteen weeks, translating to about three times a year. 

Even when you have property managers that could inspect your property, you should visit the home occupants at least twice a year.  Ensure you inspect your property during a scheduled visit with your property manager and notify the tenants, preferably one week in advance, that you will be inspecting the home.

The Hands-Off Approach

If you prefer having no relationship with your tenants or have rental property investments in another state, property management services are perfect for you. Depending on the depth of services you are paying for, the property inspectors will give you details of your home after every inspection. 

The type of contract you have with your property managers will determine how they handle repair issues and home improvements where necessary. Good property inspectors will give you comprehensive information and send you pictures of the home.

It is advisable to state how you or the property management service will carry out the home inspection in the lease agreement. At Leaf Management, you will learn more about property visits and inspections. Follow us on social media, and we will answer all your questions.

Single-Family Home vs. Duplex

Investing in real estate is a great mechanism to diversify investments. Nonetheless, it is suitable for real estate investors to be familiar with managing different types of houses. Such information will help you make well-informed decisions and handle their obligations perfectly. Let's look at what it will take to manage a single-family home vs. a duplex in terms of repairs and notices.

Difference Between a Single-Family House and a Duplex

The main difference between the two is in a duplex; two homes can be located side by side or on top of each other. They are joined together by a single wall. In contrast, a single-family is one stand-alone house that is not adjoined to another house.

Repairs for a single-family house vs. a duplex

For a single house, the homeowner you have the responsibility to repair and maintain the house. In most cases, you will be responsible for repairing leaky showers, broken-down furnaces, broken windows, or other things that may affect the tenant's comfortability. Moreover, you are responsible for maintaining the outdoor: trimming grass, shoveling walkways, removing debris, and other activities that will enhance the tenant's safety.

On the other hand, if you own a duplex, you should repair the two homes'. That will cost you more.

Single-Family House vs. Duplex Repair Notices

 It will be easier to communicate with your tenant for repairs in a single-family house since it is a single-family. But for duplex it might be a bit challenging especially when different families live in the two places. You have to organize repairs for the two homes to avoid hiring repair experts twice, which will cost you more. Also, you have to give them notices in advance to avoid inconveniences. But no matter the case, it will cost you more when managing a duplex than a single-family home. Nonetheless, a duplex has more financial gain than a single-family house.

How Property Management Fees Figure Into Your Business Taxes

Whether you are an experienced landlord or just getting started, thinking about your taxes can be a huge hassle. It is important that you are ready when the time comes so that you can quickly and easily get your taxes completed. 

Are property management fees deductible on your taxes? 

Any property management fees are deductible when it comes to your taxes. They are classified as business expenses and should be treated as such. 

What do you need to keep track of for your taxes? 

If you don't have a property manager, you are going to need to save all of your receipts for everything that you do for your rental building. This may include: 

• Office equipment. This includes your computer, printer, and phone. If you buy some furniture, that is also deductible. 
• Maintenance work. You can deduct your lawn mower, plow (for the snow), light bulbs that you replace, and the filters for any air conditioning and heating units. If you hire someone to do outside maintenance or plow the parking lot, that is deductible too! 
• Repair work. You can write off all of the tools and equipment that you need to repair any plumbing or other work that needs to be done around the building. Any appliances that need to be fixed or repaired can also be included in this. 

Why is it easier to hire a property manager than trying to do it yourself (when it comes to your paperwork)? 

For most people, it is much easier to keep track of their monthly (or yearly) property management fees than it is to keep track of every little thing that they use to do the job. Even if you get a bill for each project that they do, it is still a whole lot easier than keeping all of your receipts and keeping track of it that way! 

If you are serious about being a landlord and want to make money doing so, you might want to consider hiring a property manager. He or she will do all of the work (or whatever is agreed upon). It is also easier when it comes to your taxes. You just keep those receipts, instead of the hundreds that you have if you try to do it all yourself! Make your life a little easier by hiring someone to help. You will be glad that you did!