Hire Family Members to Manage Your Properties | Property Management Software Friday, Apr 24 2009

Property management fees are fully deductible, so consider hiring someone that you don’t mind paying, like a family member.

Obviously, the expense of your own labor cannot be written off, but that doesn’t mean your spouse or children have to work for free.

By hiring family members, it won’t bother you to pay management fees because the expense is fully deductible, and the money stays within your family.

Keep in mind you’ll have to withhold Social Security and Medicare taxes for the income you pay.

AND of course, hiring a professional is always a good idea. Your teenager might not be the greatest candidate to collect rent.

Everyone’s tax situation is different, and this information should not substitute professional advice. Taxpayers should always consult with their tax advisors to consider specific factors that might affect their situation.

To learn more about saving money on taxes, try the property management software and other money saving real estate software from TReXGlobal.com.

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Collect Rent in Advance to Offset Loss Carryovers | Property Management Software Thursday, Apr 9 2009

One main benefit of owning rental property is being able report a loss, but some taxpayers cannot take advantage of this tax shelter due to high income loss limitations. Their losses get carried forward, and cannot get deducted until they are offset with future income.

If your rental expenses exceed rental income, and your AGI limitations do not allow you to claim a loss, you can decrease the loss carryover by increasing rental income.

Since rental income is taxable in the year it is collected, rental losses can be offset by collecting rent in advance. By increasing rental income for the year, you have the leverage to deduct more of your expenses.

Everyone’s tax situation is different, and this information should not substitute professional advice. Taxpayers should always consult with their tax advisors to consider specific factors that might affect their situation.

To learn more about saving money on taxes, try the property management software and other money saving real estate software from TReXGlobal.com.

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Traveling Away from Home | Property Management Software Thursday, Apr 2 2009

You can deduct the expense of traveling away from home if the primary purpose of the trip was to collect rental income or to manage, conserve, or maintain rental property.

You can also deduct expenses incurred while staying overnight when traveling for business.

You cannot deduct the cost of traveling away from home if the primary purpose of the trip was the improvement of your property.
You can read Publication 463 to learn the specifics.

Everyone’s tax situation is different, and this information should not substitute professional advice. Taxpayers should always consult with their tax advisors to consider specific factors that might affect their situation.

To learn more about saving money on taxes, try the property management software and other money saving real estate software from TReXGlobal.com.

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Repairs due to Vandalism can be Expensed Immediately | Property Management Software Thursday, Mar 26 2009

If rental property is damaged by vandalism, the cost of repairing the property to its previous condition is immediately deductible instead of being capitalized and depreciated.

For example, say you replaced an entire window frame on your property. Normally the cost would get added back to the basis and depreciated because windows are a component of the building structure (depreciated over 27.5 years).

However, since the improvement is the result of vandalism, it is treated like a repair, and the costs are deducted in the year the expenses are incurred.

Everyone’s tax situation is different, and this information should not substitute professional advice. Taxpayers should always consult with their tax advisors to consider specific factors that might affect their situation.

To learn more about saving money on taxes, try the property management software and other money saving real estate software from TReXGlobal.com.

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Making Health Insurance a Rental Expense | Property Management Software Thursday, Mar 19 2009

Costs to insure rental property are deductible, so depending on how you structure your rental business, you may be able to cover your life and medical insurance as part of the rental business.

Structuring your rental property as a Limited Liability Company (LLC) may permit you to deduct these costs for you and your family, but you should talk to a tax advisor to find out more.

Everyone’s tax situation is different, and this information should not substitute professional advice. Taxpayers should always consult with their tax advisors to consider specific factors that might affect their situation.

To learn more about saving money on taxes, try the property management software and other money saving real estate software from TReXGlobal.com.

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Giving Gifts and Lowering Taxes | Property Management Software Thursday, Mar 12 2009

If you give gifts in the course of your business, you can deduct all or part of the cost, but you cannot deduct more than $25 for each business gift that you gave away during the tax year.

A gift that is intended for the eventual personal use or benefit of a particular person or class of people will be considered a gift to that person or class of people. If you give a gift to a member of a customer’s family, the gift is generally considered to be an indirect gift to the customer. This rule does not apply if you have an independent business connection with that family member and the gift is not intended for the customer’s eventual use.

Incidental costs, like gift wrapping, packaging, insuring, and mailing, are generally not included in determining the cost of the gift. You cannot deduct gift items that cost less than $4 if they have your name clearly and permanently imprinted on the gift, or if the gift is one of many identical items that you widely distribute, like pens and cases. Signs, display racks, and other promotional materials also cannot be deducted as gifts.

Everyone’s tax situation is different, and this information should not substitute professional advice. Taxpayers should always consult with their tax advisors to consider specific factors that might affect their situation.

To learn more about saving money on taxes, try the property management software and other money saving real estate software from TReXGlobal.com.

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Pay your Kids and Open their IRAs | Property Management Software Thursday, Mar 5 2009

If it looks like you will have a large taxable liability at the end of the year, it’s not a bad idea to hire your kids to landscape your rentals.

You can pay your kids to do work on your properties, and put the money in IRA accounts for them. This is especially a good idea if you’ve already maxed out on your and your spouse’s IRA contribution for the year. You’re better off avoiding the taxes on your extra income, and the money will be safe in a tax free shelter.

And of course, it’s a great way to help your kids prepare for their first property!

Everyone’s tax situation is different, and this information should not substitute professional advice. Taxpayers should always consult with their tax advisors to consider specific factors that might affect their situation.

To learn more about saving money on taxes, try the property management software and other money saving real estate software from TReXGlobal.com.

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Sell Property to Yourself | Property Management Software Thursday, Feb 26 2009

Selling property to your own S-Corporation may be beneficial in some specific situations, like if you are trying to meet requirements for the two year rule ($250/500k exclusion), or if you are trying to take advantage of depreciation on appreciated property.

For example, say you lived in a property for three years, and rented it out for the next seven years – since you haven’t lived there for two out of the last five years, you cannot sell the property as a primary residence to avoid the capital gain.

However, after moving out of the property, you sell it to your own S-Corporation, which allows you to exclude capital gain (up to $250k, $500k if married filing jointly) because requirements for the two-year rule have been met. The other advantage is you can have a new basis for depreciation on your appreciated property.Selling to your S-Corp isn’t for everyone though. You should avoid using this strategy if you cannot take advantage of the exclusion amount.

Everyone’s tax situation is different, and this information should not substitute professional advice. Taxpayers should always consult with their tax advisors to consider specific factors that might affect their situation.

To learn more about saving money on taxes, try the property management software and other money saving real estate software from TReXGlobal.com.

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Deductible Start-Up Expenses | Property Management Software Thursday, Feb 19 2009

Business start-up costs are generally capital expenditures, but you can elect to deduct up to $5,000 of business start-up costs incurred in 2008. The $5,000 deduction is reduced by the amount your total start-up costs exceed $50,000, and the remaining cost must be amortized.

Start-up expenses are costs incurred while creating an active trade or for investigating the creation of a business or trade. This includes expenses incurred when acquiring an existing for profit activity, as well as expenses incurred during the anticipated production of income.

Common start-up expenses may include:

• Accounting fees
• Analysis, survey, or study of potential markets, products, labor supply, transportation facilities, etc…
• Advertisements for the opening of the business.
• Office equipment and furniture, setup costs
• Salaries and wages for employees who are being trained and their instructors.
• Travel and other necessary costs for securing prospective distributors, suppliers, or customers.
• Salaries and fees for executives and consultants, or for similar professional services

Keep in mind that certain expenses must be amortized over 5 years. Such expenses include legal expenses and expenses for setting up the business structure (as an LLC, etc…)

Everyone’s tax situation is different, and this information should not substitute professional advice. Taxpayers should always consult with their tax advisors to consider specific factors that might affect their situation.

To learn more about saving money on taxes, try the property management software and other money saving real estate software from TReXGlobal.com.

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How to Deduct Losses, Even When You Have No Expense | Property Management Software Thursday, Feb 12 2009

Losses incurred because of a casualty, disaster, or theft may be tax-deductible. A casualty is a loss of property (including damage and destruction) due to a sudden event that is identifiable, unexpected, and unusual. These losses may be limited, but they are deductible as a rental activity expense.

For example, your tenant runs their car through the garage door. Even though you haven’t replaced the garage door and don’t have any expenses because you didn’t fix anything, you can deduct the cost of damages incurred as a casualty expense.

Casualty losses on rental property are reported on Schedule A from IRS Form 4684, and are not subject to the 2% AGI limitation or $100 deduction.

Everyone’s tax situation is different, and this information should not substitute professional advice. Taxpayers should always consult with their tax advisors to consider specific factors that might affect their situation.

To learn more about saving money on taxes, try the property management software and other money saving real estate software from TReXGlobal.com.

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