Maximizing Tax Deductions as a Short-Term Rental Owner
“Nothing is certain except death and taxes,” - Benjamin Franklin
Every year, Americans all over the country prepare for tax season. Ownership of a short-term rental property or vacation rental home has countless benefits. Additional income is one of the main benefits that owners appreciate.
As an owner, you can follow the “14 Days" rule when preparing to file your taxes. And don't worry -- it is very simple! If you rent your home for at least 14 days per year, you might be eligible for write-offs or deductions to help you reduce your taxable income.
Here are some basic rules to consider when determining if an expense might be deductible:
Is the expense essential and ordinary?
Is the expense a reasonable amount?
Does the expense happen during the tax year?
Does the expense relate to your rental business?
Although most IRS tax codes are confusing, putting forth the effort to determine what is deductible will increase your overall tax savings. As always, we recommend that you consult a professional accountant or tax adviser before you file your taxes.
Here are 6 tax-deductible expenses that you can take advantage of this tax season:
Cleaning Costs: This expense definitely meets all the rules mentioned above. You can deduct professional cleaning services to clean your property before and after each guest’s check-in, plus any cleaning supplies purchased and used.
Property Maintenance Costs: All repairs completed on your rental property are tax deductible. The same goes for routine maintenance or cleaning, including HV/AC units, pools, spas, landscaping, and lawnmowing.
Utility and Insurance Expenses: Utilities including water, gas, electricity, trash removal, cable, and internet expenses could be deducted from your yearly revenue. Your insurance expenses for your rental property are also tax deductible.
Services and Fees (Marketing, Accounting, Property Management, HOA, Accounting & Design): This includes property management, hiring an accountant and a vacation rental designer, any marketing fees, as well as the fee paid per reservation to companies like VRBO and Airbnb. Plus, any HOA or Condo Association annual fees. Keeping track of these fees during the year will make it much easier as tax time. Property photography fees to update and maintain your marketing materials and website are also tax deductible.
Furniture Costs, Appliances, & Supplies: Restocking broken dishes, glassware, and kitchen appliances, as well as worn or damaged furniture, bedding, and linens are all deductions. Be sure to keep track of your receipts and take photos of worn items that you are replacing.
Transportation & Travel Expenses - The costs associated with traveling to conduct business or perform maintenance or repairs at your short-term rental or vacation rental property are deductible. Accommodations, meals, mileage, and airfare as well as registration fees for seminars, conventions, and classes that benefit your vacation rental business all fall into this category.
It's a Business, Not a Hobby
The first rule of being the owner of a short-term rental or vacation rental property is that this is a business, not a hobby. Be sure to collect all receipts, canceled checks, and invoices. Ensure that you keep accurate and thorough records, and remember to take photos to document damages and repairs. Your careful scrutiny could benefit you with big returns for your rental investment business.
If you are exploring investing in a vacation rental property, we can maximize your investment and improve your returns! We are experts in the industry of vacation rental design. We can advise you on where to spend, where to splurge, and how to find the right property management company for your needs.
We know the keys to a beautiful -- and profitable -- vacation rental property. To schedule a consultation, call us at (281) 547-8276, message us through our website, or send an email to firstname.lastname@example.org.