Are Property Management Fees Tax Deductible?
Belong on Jan 16, 2023
Rental homeowners are considered business owners, and that has unique implications at tax time. When Uncle Sam comes knocking, it can be confusing to try and understand what is considered taxable income. Are property management fees tax deductible? What about Belong’s fees?
In the United States, you can generally deduct the fees you pay to a property manager as a rental expense on your tax return. However, you can only claim the deduction if you are actively involved in the rental property and receiving rental income. If you are not actively involved in the rental and are not receiving rental income, the fees may not be deductible.
If your home is rented for less than 14 days in a year or you have used the home personally for 10% of the total days in which the home was rented, your home will be considered a personal residence and you won’t be able to deduct any rental losses. Some tax deductions still apply under the 10% rule, but to a limited extent. This generally applies to homes that are used as short-term rentals for only part of the year.
What does it mean to be ‘actively involved’ in the rental property, for tax purposes?
To be considered "actively involved" in a rental property, you must regularly participate in the management and operation of the rental property. According to the Internal Revenue Service (IRS), you may be considered actively involved in a rental property if you:
- Regularly communicate with the property manager about the rental
- Make decisions about repairs, maintenance, and other property management issues
- Review and approve financial statements and reports related to the rental property
- Attend meetings with the property manager or tenants
- Perform other tasks related to the management of the rental property
It is important to note that the IRS has specific guidelines on what qualifies as active participation in a rental property. You should consult with a tax professional or refer to the IRS guidelines for more information about the requirements for active participation in a rental property.
Do Belong fees qualify as tax deductions?
In short, yes. Belong’s fees are considered rental expenses, and Belong homeowners remain actively involved in the management of their home while working with Belong. Homeowners will actively communicate with their local Belong team about repairs, maintenance, and decisions about the property, and homeowners earn income from the properties as well.
Always consult with a tax professional about your specific situation, but in general, Belong fees should be tax deductible in the US.
Which property management tax deductions can I claim, if I qualify?
Because your long-term rental qualifies as a business, there are dozens of expenses you can reasonably deduct from your taxable income. It is important to note that these deductions may have certain limitations or requirements, and you should always consult with a tax professional before filing. Some expenses you should be able to deduct include:
- The fees you pay to a property manager (or Belong) for managing your rental property.
- The cost of repairs and maintenance that are necessary to keep your rental property in good condition. This includes things like painting, fixing a leaky roof, or replacing a broken window.
- The cost of insurance on your rental property, such as liability insurance or property insurance.
What documentation do I need in order to deduct property management expenses from my taxes?
If you are audited by the Internal Revenue Service (IRS), you may be required to provide documentation to support your deductions.
This is why it is always a good idea to keep good records of all expenses related to your rental property, including property management fees, as you may need to provide documentation to support your deductions when you file your tax return. In addition to receipts or invoices for the fees, you should also keep records of any other expenses related to the property, such as repairs, maintenance, utilities, and insurance.
How does Belong help homeowners during tax season?
Belong is a worry-free alternative to traditional property management, and that includes taking care of owners during tax season. Belong homeowners never have to scramble to locate documents or tally up expenses at the end of the year; instead they can download everything they need from one convenient online portal.
Belong provides homeowners with end-of-the-year earnings statements that detail all of the payable and receivable transactions in an earnings statement format. Homeowners can also access their 1099 documents via their online account. They also receive personalized concierge assistance with locating documents needed for tax purposes or answering questions about expenses or fees.
Find out if your rental home qualifies at belonghome.com/homeowners.