Whatever the reason for purchasing your vacation rental in Florida, it is only a joy if that home is working for you. The benefits of owing a vacation home are many – always there when you want a quick trip away, additional income and, of course, the increase in worth of your property over time. However, what some rental owners do not realise is that you can make your villa work for you! If you rent out your home for at least 14 days a year, you could be eligible to write off some, or even all, of your rental expenses, which will reduce your taxes.
I can hear the groans from here! “Oh no, they’re talking about tax!!!” Agreed. Most of us find taxes confusing, boring and horribly necessary. BUT, familiarising yourself with what is deductible can help you make the cents on your dollar work better for you. Even small expenses for your villa can soon start to add up, so knowing what is deductible and what isn’t is paramount.
Generally, tax deductible expenses have to be:-
- Ordinary and necessary
- Directly related to your rental activity
- Reasonable in amount
- Incurred during the tax year
Above all, having a professional financial advisor to give you the right advice is essential. Thereafter, knowing ahead of time what expenses are deductible and what aren’t will help greatly.
Vacation Rental Cleaning
A clean vacation rental is imperative for good reviews and to hopefully get repeat bookings. A bad review can cost dearly in the tourism market. For the majority of owners, cleaning their villa themselves is not possible, so their property management company provides a cleaning team to keep the home in tip top shape. These clean fees and cost of supplies are tax deductible.
Transportation and Travel
If you have to travel in order to carry out repairs or maintenance at your rental villa, you might be able to claim for mileage, meals, airfare and accommodation. This also applies to classes, trade shows or other conventions that could benefit your rental business.
Most everyone who owns a rental villa in a community is liable for HOA fees or resort fees. It is worth checking with your financial advisor which of these fees can be tax deductible.
Property Management Fees
Most owners hire a vacation rental property management company, such as Eagle Management, to oversee marketing, booking, guest services, and maintenance of your property, their fees or commissions can be classified as tax deductions.
Vacation Rental Supplies, Maintenance & Repairs
Wear and tear of your vacation rental can be costly. The more bookings you have, the more foot traffic, resulting in breakages, water damage and mechanical failure. Fortunately, sheets, cutlery, crockery, furniture, appliances can be tax deductible. As is, pool maintenance, lawn care, repairs and supplies.
Everyone has to have utility companies supply the necessary power/water/TV for the villa to remain operational and these utilities can take a good chunk out of your monthly incomings. These bills could be deducted for the duration you rent out your villa. Added up monthly, these can be some serious savings come tax time
Vacation Rental Insurance
You rely on your beautiful vacation villa to earn you rental income. Having a comprehensive insurance policy to protect for hurricanes, flood damage or any other unexpected damages/repairs, is essential. Obtaining good insurance comes at a cost but luckily home insurance can be deductible.
The majority of your marketing is taken care of by your management company. However, there are companies that charge host service fees and this is taken directly from your income. It is worth keeping track of these fees as some can be deductible on your taxes.
Most of your accounting is taken care of by us. However, personal taxes and completing tax paperwork is confusing at the best of times. There are codes to memorize and copious forms to be completed, as well as receipts, checking stubs, invoices and other proofs of income/outgoings to be provided. Frankly, it’s all best left to an accounting professional. Luckily, these fees may be deductible also.
Here at Eagle Management we do a lot of the work for you. If you should have any questions regarding taxes and what can be classed as deductible, we’d be happy to help. Just give a team member a call or drop us an email.