Tax Deductible Rental Property Costs: Insurance, Cleaning/Maintenance, and Repairs

If you are engaged in leasing property to obtain income, it is crucial that you ensure a number of fees and services are adequately arranged and documented for IRS considerations. We will look at these expenditures.

Insurance

Just as in the majority of premiums, it’s usually pre-paid in advance for a certain amount of time. Scenario: You obtained insurance on the property in March 2012 for $1200. April 2012 to March 31, 2013 would be the policy duration of this insurance policy. As the insurance coverage period does exceed the current tax year, you must apportion and identify the insurance premiums applicable to the present year only and then carry forward the balance for the upcoming reporting period. With this scenario the allowed insurance premium tax deduction could be $900 (9 months April to Dec 2012) or $100 per month of qualified rental property use.

Note that many Insurance carriers routinely combine premium packages among personal and business clients at a discounted charge. You have to ensure that you just allocate the part which is relevant for your business rental property from this tax deduction. The personal and non business use could be deductible on your personal tax return. You can include Title insurance in the Cost Basis of the rental property, since it is not an allowable expenditure.

Cleaning and Maintenance

If it’s applied to ongoing cleanliness and upkeep of general places, then day-to-day repair of the rental property is an allowed expenditure. These expenditures are also restricted to the days which have been tax deductible rental property days rather than personal use days. To make sure that the rental property is in fine shape and working order, you can do what various other property owners do, and hire a local contracted company to take care of the property. This can consist of such professional services as cleaning windows, dusting, cleaning home appliances and general maintenance. Structural maintenance and alterations will not be allowed, so have to be listed in the property’s Cost Basis.

Repairs

Once in a while, there could be some need to mend a home appliance, touch up a little painting, or some kind of activity which does not demand significant reconstruction of the property structure. Depending on the leasing duration, you’ll be able to write off these kinds of essential and typical costs.

Do not ever include any kind of times which will be considered to be personal use days, since expenses are only allowable in relation to the earnings of the property. Only those expenses in which are directly related to the authorized leasing time frame are allowed.

• On the Internal Revenue Service’s internet site, you will find the a variety of reports you’ll need. Reference IRS Publication 527 for more information.

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Bellingham CPA+John Huddleston has written extensively on tax related subjects of interest to small business owners. He is a graduate of Washington State University and the University of Washington School of Law.