Some times of the year bring a little more pressure and stress than others. And tax season is no exception. Whether you’re new to rental property investing or a rental veteran, there’s always something new to learn, pitfalls to watch out for, and emerging trends to know before filing taxes. Today, we’ll broadly stroke those few mission-critical aspects of tax preparation, so you can confidently file taxes this April.
Work with an Experienced Tax Professional
No matter how savvy you are with your personal finances and tax filings, rental property investment taxes are complex. Don’t try to go it alone, especially this year with so many layers of nuance associated with tenant moratoriums, community regulations, and new tax codes. Find an accounting professional who’s certified and well-experienced in real estate taxes. Inquire about other rental property investors they work with at tax time. And ask for references. Don’t settle on anyone you’re not 100% comfortable with in helping you prepare for filing.
Get Your Documentation in Order
Now’s the time to see just how diligent you were in 2022 about record keeping. Regardless of the systems you use, documentation is the only way to back up any claims you have for deductions, earnings, assets, and expenses. Assemble the proof of your transactions so you can demonstrate, with your tax filings, a snapshot of your rental property investment business. Here’s a crude checklist to help you prepare for the meeting with your accounting or tax professional:
- Ledgers or reports of operational expenses and earnings
- Complete depictions of each property in your portfolio
- Records of tenant interactions, including lease agreements and evictions
- Documentation of financing or loans initiated or in place for 2022
Itemize Eligible Deductions
Another list you’ll need to assemble involves eligible deductions. Rental property investors can reduce tax filing burdens with deductions and available tax credits, so be mindful to include every penny that counts in your favor. Include documentation for these and others to discuss with your accountant:
- Mortgage interest
- Property taxes paid
- Insurance premiums and claims
- Property maintenance and repairs
- Vendor and contractor expenses
- Software and digital programs
- Depreciation values of your assets
- Energy efficient upgrades eligible for tax credits
- Municipal tax credits for disadvantaged parties or neighborhoods
Income Reporting on Your Taxes
You’ll need to also prepare an itemization of income with respect to your rental property. And be honest here. The IRS defines rental earnings as any payment you collect for the use or general occupation of property. These payments include:
- Direct rent payments
- Advance rent payments
- Fees associated with early lease cancellation
- Traditional and pet deposits
- Services received in lieu of cash payment
- Tenant paid expenses
Understanding Various Taxes
Be prepared to pay more than just income taxes. There is a slew of taxes that will come into play when you file this year. Understand each level of taxation and prepare to talk with your accounting professional about any questions you might have about documenting, calculating, and declaring.
- Federal income tax
- State income tax
- Real estate tax
- Property tax
Now is also a great time to enact change and improve efficiencies with your rental property investments. And if, looking back at operations in 2022, you spot gaps or issues, it’s time to bring in a rental property management partner. Contact PMI JCM Realty Group to help you streamline your operations, earning potential, and expense management!
We Can Help
We have a dedicated mission to continuously share emerging trends about rental property investing in the real estate market. If you’re open to more effective ways for improving your landlord-tenant experiences, vendor relationships, portfolio performance, or your ROI, get signed up for our free webinar. You’ll find game-changing, real-life expertise for rental investment success. Plus, it’s a great resource with all the advice and actionable tips for today’s rental investors. Experience How to Streamline Your Rental Portfolio for Maximum Growth! Rental property investors, both here in Tampa and elsewhere, will always find something innovative worth applying.
You can always connect with us on social media, as well! Participate in our Facebook Group discussions, which are great for discovering answers to the most pressing rental management investment questions. Join the insightful conversations and collaborate! Reach out to other property owners interested in achieving similar portfolio ROI goals. Exchange suggestions with fellow professionals and talk in-depth about today’s tenant challenges. And should you require a more detailed or tailored solution, hop online and schedule a meeting on my calendar!