Home vs. Business Expenses and Tax Deductions for Landlords
From Completelandlord.com

No matter what anybody tells you, you cannot deduct personal, living or family expenses
as business expenses. The IRS is committed to keeping your business expenses separate,
despite a rise in fraudulent home-based business tax schemes. The IRS noted that the
following examples are not considered ordinary and necessary expenses to run a
business:

¢ Deducting all travel, meals and entertainment because anyone you meet is a
potential client
¢ Deducting all automobile or truck expenses when the vehicle was used both for
personal and business travel
¢ Deducting payments to family members as business expenses when the activities
performed were for the use of the home and family
¢ Deducting excessive payments to family members as business expenses when the
activities performed would not warrant the amount paid
¢ Deducting utility expenses for the entire home because business materials have
been placed in every room so the whole house is, in effect, the home office
¢ Deducting all of the medical expenses for family members
¢ Deducting education expenses for family members

Recordkeeping 101:
Real Estate Tax Planning for Landlords
Newer landlords may not be aware of all the paperwork they have to keep on tenants,
their rental property and their taxes. To be safe, landlords should keep the following
records to support their tax deductions, reported income and to keep tabs on tenants:
¢ Tax records for the last seven years
¢ Maintenance schedules for all rental property organized by property and by type
of work done
¢ Improvement schedules for all rental property organized by property and by type
of completed project
¢ Building records including the original cost of the building, the mortgage and
information about when the building was constructed
¢ Bills, receipts and invoices from all contractors, cleaning services or companies
who have done work on the rental property
¢ Insurance policies for all rental property organized by building
¢ Tenant contact information including telephone number, cell number and email
address
¢ Signed rental agreements and leases from all current tenants
¢ Financial information on disposition of all security deposits for current tenants
¢ Correspondence file with all letters, notices, legal actions and contacts with
current and former tenants

IRS Tax Credits for Older Buildings
Many new landlords shy away from buying older buildings due to higher maintenance
costs associated with older structures. However, the IRS offers a substantial tax credit
for landlords who buy certain older or historic buildings.
The Rehabilitation Tax Credit applies to the costs of renovation and reconstruction of
specific buildings. The credit includes renovation, restoration and reconstruction but
does not include new construction or enlargement of the original structure. Currently, the
IRS allows:

¢ 10% credit for the rehab of non-historic buildings that were built before 1936
¢ 20% credit for the rehab of a Certified Historic Structure. (Certified Historic
Structures are listed on the National Register of Historic Places, located in a
Registered Historic District or determined to be of significance to the Historical
District or community.)

The rehab credit is generally given in the taxable year in which the property was placed
in service. The taxable year is usually the time that the entire property was placed in
service. The taxable year is usually the time that the entire property was ready to be
rented or when only a portion was available to be rented.
Reprinted with permission of the Wisconsin Apartment Association News.

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