Things That Must Be Done This Tax Season Before The Door Closes

Things That Must Be Done This Tax Season Before The Door Closes

Buildium.com

Tax time is a great time to review your portfolio’s performance but it is also an important time for you to maximize profits and follow IRS requirements. Let’s review 4 must-do things during tax season:

    • Send Contractors a 1099 – The IRS requires you to send any contractor whom you paid a total of six hundred dollars or more a 1099. It is important to note, the six hundred dollars is a total per calendar year and not per receipt or job. Online property management software can automate this process for you.  At the time of service, have your contractor fill out a W-9 (Request for Taxpayer Identification Number and Certification). This is not only a requirement, but also a protection to you, as it proves the contractor was not your employee and you aren’t required to pay FICA taxes on his pay. I also like to use this a negotiation tactic. When my bids come in above the six hundred dollar threshold, I quote the requirement and offer to pay five hundred and ninety nine dollars. More times than not the contractor accepts the lower amount.

 

  • Depreciate Your Property – The IRS allows residential rental properties to be depreciated over 27.5 years.  This depreciation includes only the building or structures on the property, not the land value.  This value is a tax deduction, lowing your total taxable income.
  • Review Your Earning – Review your earnings and taxable income and estimate next year’s earnings and taxes. If you paid more in taxes than you want, next year plan on performing upgrades on properties that will provide quick tax deductions. Appliances, carpet, kitchen and bathroom upgrades, roof replacements and most other property upgrades all provide tax deductions through property depreciation. The depreciation period time varies depending on the IRS property class. IRS property classes are 3 year, 5 year, 7 year 10 year, 15, year and 20 year property. Appliances and carpet are depreciated over five year. The IRS does allow you to accelerate your depreciation, allowing you to deduct more depreciation earlier in the recovery period. Review this option in detail and discuss the option with your tax advisor as acceleration may force you into the AMT (the alternative minimum tax).
  • Set Up an Online Management Service – Online management software provides a quick, cost effective way to manage your property’s financials, property vacancy listings, tenant screening, repair notices and payments all easily for a low-cost monthly fee. Buildium is a great online property management software that offers a free trial period and has software options starting as low as 45 dollars a month.

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