Proving Tax Write Offs With Receipts With Rental Homes

Landlords may lower their taxable income with good recordkeeping.

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The U.S. tax code allows landlords to deduct several items from their tax returns related to their rental property. The deductions reduce taxable income. The process for tracking allowable deductions requires meticulous recordkeeping in the form of saved receipts, contracts and any other document that proves a deductible expense. To enjoy the tax write-offs, landlords need to know what expenses are deductible. The IRS provides the details, but a tax accountant also can be a valuable resource for a real estate investor.

Step 1

Establish the recordkeeping method that best works for you. The IRS does not make stipulations in this regard. You might throw your receipts in a box and add them during tax season or log every expense in an electronic database that recalculates the total every time you add a new line item. It is necessary to keep the receipts to back up the information entered in the database.

Step 2

Organize your receipts and other proofs of payment by year and type of expense. These documents include sales receipts, canceled checks and account statements such as the ones credit card companies and banks issue. It is particularly important to obtain dated and signed receipts for cash transactions with brief descriptions of your expenses. In general, the IRS allows deductions for the cost of advertising the rental property, for car and travel expenses related to owning and maintaining the unit, and for cleaning and property-management services. Insurance, repairs, legal and other professional fees, and utilities not paid by the tenant are also deductible expenses.

Step 3

File in a safe place the sales contract for the home you rent out. You must be able to prove how much you paid to also claim depreciation as a deduction. IRS depreciation rules let landlords write off wear and tear.

Step 4

Store your tax returns in which you report income or claim deductions for a rental home, as well as the supporting receipts. Keep the documents for as long as you own the rental unit. The IRS instructs you to save the records for an additional three to seven years from the year you dispose of your rental property.