How Property Managers Can Get More Out of Their Taxes

As with most other businesses, it’s important for rental property owners to know how to make the most of tax advantages. Even without the advice of an accountant, a property manager can leverage their business taxes with these few steps:

1. Claim a Home Office. If you run your property management business from your home, you can claim a portion of your house expenses as a business deduction.

2. Minimize Overall Tax Liability. As a Schedule C filer, there are numerous ways a property manager can save on tax liability, such as keeping detailed records on travel mileage for every property shown or even trips to the post office, bank, or office supply store.

3. Maximize Benefits on Rental Losses. Real estate professionals have a unique advantage in benefiting from rules regarding Modified Adjusted Gross Income (MAGI). Under normal circumstances, any taxpayer actively involved in real estate may use up to $25,000 in rental losses to offset other sources of income, up to a MAGI threshold of $100,000 and phased out altogether at an income level of $150,000. Real estate professionals, however, are permitted to offset the entire amount of rental losses, regardless of income level. Although there are a few exceptions to this rule, which should be determined by a tax professional on a case by case basis, property managers are ideally suited to qualify as real estate professionals in taking advantage of this deduction.

4. Deduct Repair Costs. Any fees over $600 paid to a repairman for services to a rental property should be separately reported.

5. Create Additional Streams of Revenue. There are many ways owners can add resale value or increase the capitalization rate of properties, such as installing coin-operated laundry machines in multi-family units or offering cleaning or landscaping services to clients in single-family homes. In this instance, a property owner can negotiate fees for such services at one rate and pass on a slightly higher fee to the tenant for the service, thereby increasing revenue.

6. Join Landlord Associations. While not a direct tax benefit, joining a local association can offer a property owner invaluable information and access to resources such as legal and accounting services, as well as referrals for inspectors and contractors.

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