Making Rentals Less Complex

Author: Keith Huggett

As the 2013 "fiscal cliff" approaches, many small businesses are taking a closer look at their tax strategies. For those in the real estate and rental businesses, income tax returns have always been a bit complex. This year, more than ever, it is essential that you follow sound tax strategies for landlords in order to take advantage of expiring credits and deductions without getting caught in an audit.

Here are few basic tax strategies for landlords that may make end-of-the-year forms and reports easier:

• Understand deductions: There are numerous deductions currently available for individuals and businesses with rental properties. You can deduct interest paid on property loans, similar to the deduction received by single-family home owners. You can also claim a deduction related to the depreciation of property. In addition to property-based deductions, landlords can also claim expenses. Insurance premiums associated with your property and travel expenses that are incurred maintaining properties can be deducted. There are limitations on these deductions, so be sure you understand the tax code or seek professional assistance in preparing returns.
• Avoid common mistakes: Small, family-owned companies often make common mistakes in business management, such as mixing personal and business accounts. Keeping finances and expenses separate not only decreases the work come tax time, it also reduces the chance of a mistake or an audit.
• Create easy access to data: Cloud computing now offers easy tax strategies for landlords. Technology that was previously available only to large businesses can now be accessed by individuals and small companies. With cloud computing, you can share financial data with professional accountants or access all your records from any location and at any time. Instant access to and organization of records reduces the time your income tax forms take and decreases the likelihood of a mistake.