Tax Deductible Rental Property Expenses, Part 2: Insurance, Cleaning /Maintenance, and Repairs

Now that you are engaged in renting your property out for income, it is very important for you to ensure that certain fees and services are properly set up and recorded for tax purposes. Let’s discuss some of these expenses.

Insurance

As with most premiums, this is usually prepaid in advance for a certain period of time. An example here would be you purchased insurance for this specific property on March 2012 for $1200. The coverage period is from April 2012 to March 31, 2013. Since the coverage period does exceed the current tax year, you must apportion and allocate the premiums applicable to this current year only and carry forward the balance for the next reporting period. In this example your allowable premium deduction would be $900 (9 months April to Dec 2012) or $100 per month of qualified rental use.

Please note that some Insurance carriers frequently bundle premium packages between personal and business customers for a discounted rate. You must ensure that you only allocate the portion which is applicable to your business rental property from this deduction. The personal and non business use may be deductible on your personal income tax return. Finally, title insurance is not applicable as an expense and must be included in the Cost Basis of the property.

Cleaning and Maintenance

The day to day maintenance of the property is an allowed expense provided it is only for common areas and day to day cleanliness. These expenses are also limited to the days that are allowable rental days and not personal use days. Many property owners have contracts with local services to maintain the property on an ongoing basis to ensure it is in working and useable order. This may include such services as window cleaning, dusting, appliance cleaning and upkeep. Only these types of services are allowed, any type of structural repairs and/or changes must be allocated to the Cost Basis of the property.

Repairs

On occasion, there may be some need to repair an appliance, touch up some painting, or some task that does not require a major renovation of the property structure. These costs which are ordinary and necessary are deductible in accordance with the rental period of time.
It is important to note that these costs that are usually deductible against the income of the rental property, you must not include those periods that are considered personal days of use. Only those expenses in which are directly related to the approved rental period are allowed.

  • You can obtain the different documents outlined in this information on the IRS’s webpage. Refer to IRS Publication 527 for additional information.

Seattle CPA+John Huddleston has written extensively on tax related subjects of interest to small business owners.  Since 2002, he has owned Huddleston Tax CPAs. He is a graduate of Washington State University and the University of Washington School of Law.

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Seattle CPAAbout Seattle CPA
Seattle CPA+John Huddleston has written extensively on tax related subjects of interest to small business owners. Since 2002, he has owned his own small business, Huddleston Tax CPAs. He is a graduate of Washington State University and the University of Washington School of Law.

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Huddleston Tax CPAs of Seattle & Bellevue
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Huddleston Tax CPAs & accountants provide tax preparation, tax planning, business coaching, Quickbooks consulting, bookkeeping, payroll and business valuation services for small business. We serve Seattle, Bellevue, Redmond, Tacoma, Everett, Kent, Kirkland, Bothell, Lynnwood, Mill Creek, Shoreline, Kenmore, Lake Forest Park, Mountlake Terrace, Renton, Tukwila, Federal Way, Burien, Seatac, Mercer Island, West Seattle, Auburn, Snohomish and Mukilteo. We have a few meeting locations. Call to meet John Huddleston, J.D., LL.M., CPA, Tawni Berg, CPA, Jennifer Zhou, CPA, Jessica Chisholm, CPA or Chuck McClure, CPA. Member WSCPA.