Whether you own a large multifamily property management company or simply rent out a single investment property, there are tax deductions waiting for you to take advantage of. Most landlords realize that some of their property management expenses are deductible, many are leaving money on the table by failing to use tax rules to their full benefit. We’ve compiled a list of overlooked tax deductions available for property managers in 2015.
Travel is a necessary part of property management, and depending on the location of your rentals you might spend more time than you’d like in your car. You can deduct the cost of car maintenance and fuel from your tax burden, with the exception of travel to and from your primary residence and work. As with other deductions, you can choose between an itemized and a standard deduction for car expenses. If you choose to itemize, you’ll need to keep careful records of all car expenses for the whole year. If that’s not your style, you can keep track of how many miles you travel for work, and use the standard mileage rate. The 2015 rate is set at 57.5 cents per mile, up from 56 cent in 2014.
Though sites like Craigslist and Zillow are free to use and very effective at filling vacancies, any advertising costs necessary to fill units are deductible. This includes postage for mailers, listing fees, and other costs as necessary.
Property management fees
If you own property, but don’t manage it yourself, any fees you pay for property management services are fully tax deductible.
Though office liquor cabinets have mostly gone the way of Mad Men, the cost eating and drinking while discussing a business matter is partially deductible. If you keep careful records and discuss business over the table, you can deduct 50% of the cost of the meal.
If you pay some or all of the cost of utilities for your tenants, those expenses are tax deductible. This includes electricity, gas, other heating methods, water & sewer, and trash pickup. Until the internet becomes a public utility, you can’t deduct the cost of picking up the tab for internet access.
Employee salaries and related expenses
If you hire employees to help run your property management company, their wages, social security contributions, health insurance costs, and other benefits are deductible. This applies to all employees and independent contractors, a person who is not an employee, but supplies services for your business.
Insurance on rental properties typically costs 15 to 25 percent more than homeowners insurance for an owner occupied property, but it’s a deductible expense! If you work out of a home office, you can also deduct a portion of the insurance for your primary residence.
Rent for equipment and tools
If you rent vehicles, tools used for maintenance, a giant bounce house for your yearly company party, or other business related items, the money paid in rent is tax deductible as a business expense.
Always consult your accountant or the IRS to determine the correct way to file your taxes and the proper deductions for your specific situation.