Taxes are a necessary evil consistent with owning your own business. Fortunately, there are many laws and regulations that allow a landlord to obtain tax breaks for their expenses over the year. Understanding potential tax breaks and the best ways to handle your taxes can go a long way toward minimizing your overall expenses. It is vital to keep detailed records regarding your expenses, so that you will be prepared to respond to audits from the IRS.
Two Kinds of Expenses
There are two kinds of tax-deductible expenses: current and capital. Current expenses are essentially one-off costs. They are generally lower costs than capital expenses, but they can be written off in their entirety. To qualify for current expenses, a cost must be ordinary and necessary, have short-term value, be directly related to your business, and be a reasonable amount.
Capital expenses generally have long-term value and must be depreciated over multiple years. These expenses are typically improvements or other long-lasting assets. For example, fixing a broken fridge would be a current expense, but completely replacing the fridge would be a capital expense.
Potential Capital Expenses
There are many expenses that can be counted as capital expenses. The main capital expenses that you will want to consider are the value of the structure, the value of improvements you have made, and the cost of the equipment you use. Vehicles that you use for your business can also be counted as a capital expense.
Potential Current Expenses
Current expenses do not need to be depreciated. Repairs, which are considered any effort that is made to maintain the property’s current condition, are current expenses. Tax payments, insurance premiums, utility payments, travel expenses, legal fees, and operating expenses are all tax deductible.
There are many other tax-deductible expenses that can help save you money over the long run. For example, management fees that you pay to property management companies, such as Keyrenter, can be tax-deductible. To get more tax tips for landlords, contact us at the Keyrenter in Atlanta today!