As a landlord, you naturally have a lot of responsibilities. The last thing you want to deal with is scrambling around in the spring trying to locate receipts and determine whether you owe taxes. The situation becomes even worse if you operate your landlord business as an S-Corp or LLC, because you need to ascertain your profits as well as any personal tax liability you may have. The best time to prepare for your taxes is at the end of the year, rather than waiting until they're actually due. This is also a good time to review other areas of your business to find opportunities for improvement.
The problem is that many landlords procrastinate dealing with their taxes because they simply do not know what to do. Yet, as we all know, putting off doing something certainly does not make it go away. It only makes it worse in the end. Setting aside some time now, at the end of the year, can help save you a tremendous amount of stress later on. Below, we cover the main items you need to handle before the end of the year.
Property taxes can be a great business deduction, but keep in mind that you can only deduct them if you actually pay them. If you are behind on your property taxes, you cannot deduct them. Make sure you have all receipts showing you have paid your property taxes for the year.
Repairs and supplies for your rental properties are also deductible. Once again, make certain you have all the proper receipts. If you made payments to independent contractors to handle repairs for your properties, you will need to issue 1099s to those individuals.
It is not uncommon for landlords to utilize private funds or loans from individuals rather than traditional bank loans. If this describes your situation, you will need to make certain you prepare a 1099 showing the interest paid to any private lenders.
While insurance is not a very exciting topic, it is a necessary one when you are a landlord. The end of the year is the ideal time to review your insurance policy and make sure it accurately reflects the value of your properties. This is particularly important if you have made any updates to your property that might have resulted in an increased property value. The end of the year is also a good time to check out other insurance firms, to make sure you have the best pricing.
Software and Online Tools
Are you making the most of all available online tools? Running a property rental business can be time consuming and complex. Fortunately, there are now many online tools available that can help to streamline your business while removing a lot of the hassles. One way to begin transferring your business online is to sign up for a service like VerticalRent. This service can help you to do everything from screening prospective tenants to marketing your properties and collecting rent online, thus giving you more time to focus on other areas of your business.
There's a good chance that you probably do a lot of driving while checking on properties. If you are not claiming that mileage, you are missing a huge tax deduction. You do not want to wait until it is time to file your taxes to figure out how many miles you drove over the last year. Set aside some time now to accurately track your mileage. Remember that the current standard rate for mileage, according to the IRS, is 57.5 cents per mile.
Growing Your Business
Where do you want to take your business in the future? Would you like to add more properties? Make your business operations more efficient? Businesses do not grow on their own. The end of the year is a good time to sit down and analyze what worked well for you over the last year and which areas could use some improvement. What goals would you like to achieve in the coming year? Taking some time now to map out where you want to take your business can help you to make those goals a reality.