You Can Earn Smartly from Rentals in Florida with Tax-Deductible Expenses
Apart from immersing in the scenic beauty of Florida, people have many business opportunities here. You might already know that it is an international tourist destination that encourages people from all over the country to spend their holiday. Florida is popularly known as the ‘Sunshine State’. You can guess from the name that it has a sunny climate throughout the year with mild winter. The Emerald Coast has all the attractions that you can imagine. It has white sand beaches with sparkling green water.
So, it is evident that rental accommodations around popular sites are in high demand. The real estate market has shown steady growth in terms of property sales and housing prices. As the business and job opportunities increases, more people come and settle down here. Some people invest in vacation homes not only for personal use but also for rent.
For these investors, there are many cottages for sale in Destin, the world’s luckiest fishing village. It is a fairly popular tourist destination in Florida. You can search for the things to do, restaurants, local businesses, and many more from the website DestinFlorida.com. It is a hub of several networks most beneficial to the visitors of Destin. You can book your rentals here without any charges. It is also an important site where local businesses can list their services.
There are plenty of ways in which you can make your rental business profitable. The best part is that the laws of Florida have tax deduction provisions for certain business expenses. As the landlord, if you don’t utilize those provisions, you are bound to lose out more money instead of saving a substantial amount. These tax policies are to encourage the rental business. Make sure you know the tax-deductible expenses.
Ten Expenses That Are Tax-Deductible in Florida
- Interests on loans and credits – Whether it’s a mortgage loan or credit payment for business purposes, you have to pay a lot on their interests. Some loans have high-interest rates. The Internal Revenue Service (IRS) of the US lets you claim all the interest against your rental income.
- Insurance – All the insurance related to the rental property, the employees, and the landlord liability falls under the deductible expense. It can be health insurance of the workers or the general theft insurance of the rental property. You can save on tax with these expenditures.
- Maintenance and renovation cost – To maintain a rental property you have to take proper care of it regularly and spend on the repair and renovation. It is mainly a sudden expenditure that lowers the rate of profit from the income. But you don’t have to worry as it is also one of the tax-deductible expenses. Keep in mind that property improvement is different from repair and renovation. Although you can claim deductions for both expenses, you won’t get property improvement deductions upfront. You can reclaim it through depreciation.
- The value of the personally-owned property – Usually, when you use the personal property for rental activities, you can claim it as a deductible expense. You can get the deduction in a year with de minimis safe deduction for properties worth up to $2,000. It can be an appliance, equipment, or furniture.
- Traveling expenses – All the regular travel for maintenance and inspection of rental property is deductible. You can even claim overnight travel expenses if you have all the records and information of the traveling and its purpose. It includes air tickets, accommodation, food, and other costs.
- Payment of independent contractor and employees’ wages – Whenever you spend money on appointing or hiring somebody for running your rental business, be it contractual, part-time, independent contractor, or full-time, it is one of your business expenses. Thus, it falls under the rental property tax-deductibles.
- Management fees – People often hire a professional property management agency to manage their rental property. Its costs are also deductible together with the listing and advertisement cost.
- Utility bills – All the utility bills that you pay as a landlord for your rental are tax-deductible. You only deduct the amount you use the property for rental purposes. If you use it personally for 20 days and rent out for 80 days, you can only claim 80% of the total cost of utilities.
- Expenses for food, furniture, or other supplies – All the costs for the supplies provided to the guests are deductible. The items can be food, beverages, linens, and toiletries.
- Local municipal services – You can also deduct certain fees you pay to the Destin Florida municipality for services like snow and garbage removal. But you may confirm first with the local authority for accurate information.
When Are House Owners Association (HOA) Fees Deductible Expense?
Generally, HOA fees are for funding the maintenance of the property and the community areas. The IRS considers it as tax-deductible if you use the property as a rental. There are certain conditions according to which you can decide whether HOA fees are deductible or not –
- When you live in the property for the whole year – It is not a business expenditure if you use it for your living. So, in this case, it is in no way a deductible expense.
- When you use it for only rental purposes – You can claim the tax deduction for rental property.
- When you rent out for some period and use it personally at other times – It may be complex to say how much deduction you would get in this case. However, you can expect to deduct the HOA fees for the rented period.
If you actively continue your rental business throughout the year, you can deduct up to $25,000 on the total rental income. It is not a small amount. If you are efficient in managing the business expenditure, you can get more profit using the tax deductions than those who don’t. You should consult an expert advisor to enjoy all the tax benefits and make the right decision. Moreover, you should keep all your accounts clear and record every detail and receipt for future reference and for claiming tax benefits.