If you are a homeowner you know the satisfaction of having a place you can call your own and feeling the freedom to make changes and upgrades to your property whenever you want. So what do you do if you're faced with needing to relocate; do you sell your home or should you rent it? There can be some real benefits to hanging onto your property and renting it out instead of selling. By renting out your property you have the option to return to that property at a later date. Perhaps your relocation is only temporary in which case it makes sense to keep your current residence and rent it out. What about tax benefits? Good question. There are basically two kinds of expenses that can be claimed when renting your property, those expenses are current expenses and capital expenses.
Current expenses are those expenses that recur periodically, such as re-staining the deck, painting the home's exterior as well as maintaining the interior of the home.
Capital expenses are those that increase the value of the home, such as kitchen or bathroom upgrades, or building a new deck. If the property you are renting is not your primary dwelling place but simply a rental property to generate additional income then the purchase price of the home would also be considered a capital expense.
In additional to these expenses that can be deducted, we came across a list of other deductions in a recent article in Young and Thrifty.
•Your insurance on the property.
•Advertising that tries to attract people to your rental property.
•Several different fees from lawyers and mortgage brokers.
•The cost of office supplies (obviously this applies more to large scale landlords).
•Bookkeeping/accounting/tax preparation fees.
•The salary/wages of your property manager and any other people you employ to take care or provide services to the property (and labor/time you put in to the equation is not tax deductible however).
•Repairs to the property.
•The cost of providing utilities if you choose to pay for them on your rental agreement (making this an interesting perk to provide for clients).
There are definitely some clear advantages to renting your property but it's always a good idea to consult with a trusted attorney or tax accountant to ensure that you are getting all the advantages while protecting yourself from any costly mistakes.