Year End Tax Tips for Furnished Rental Properties

December brings holidays, presents, joy, eggnog and, of course, year-end tax planning. Most of us need to make sure our company’s financial house is in order before midnight rings in on New Year’s Eve. If you’re not doing so already, you need to think of your rental property as a “company,” and one that requires proper tax planning. Here are some tips to get you started:

Cross check your expenses with your income: If you’ve had a great income producing year, it’s likely you have had only a few deductions. If you want more deductions so you can lessen your tax burden, considering investing in a capital improvement project before the year-end. You could do some simple updates to your paint and decor, or replace some appliances that need replacing even though they haven’t broken… yet.

Deduct your marketing expenses too: Often times we remember to deduct our mortgage, taxes, insurance, and other expenses, but we forget about deducting our marketing expenses too. Remember, if you’re using an online source to market and list your property, you can deduct that as a bonafide expense. It’s a great time to purchase upgrades to your listing (ie, additional photos) so you get the deduction for 2010 vs. 2011.

1099 ’em: If you have hired professional contractors to maintenance your property (lawn services, contractor, maid), and you paid them more than $600, you’re required to send them a 1099 by January 31, 2011. The year-end is a great time to look back on all your expenses and access who needs a 1099.

This blog post includes some basic year-end tax planning ideas and is no substitution for professional tax advice from a certified public accountant. Please consult your accountant and/or financial advisor for more detailed information.

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