How to Get a Business Loan

How do you begin your search for a business loan?

Applying for a business loan
Many banks and alternative lenders are out there vying for your attention. Once you decide on a lender, what’s next?

Here are the steps to obtaining your business loan:

Step 1. Determine why you need the money.

This will drive your choice of lender and loan type. Different kinds of loans can be used to:

  • Cover the costs of launching a business.
  • Help you buy an existing business.
  • Purchase specialized equipment.
  • Provide working capital for payroll, marketing and hiring.
  • Resolve cash-flow problems — often needed for a seasonal business.
  • Help you expand your business.
  • Refinance an existing loan at more favorable terms.

Step 2. Calculate how much financing you can afford.

Determine your debt service coverage ratio by looking into your finances. Take the following steps:

  • Use a business loan calculator to find the monthly payment on your loan before you commit.
  • Check out your company’s profit and loss statement. Will incoming revenue be enough to cover the monthly payment?
  • Determine your debt service coverage ratio or DSCR. Take your average monthly net income and divide it by your monthly loan payment. It should be above one. If it’s below, maybe a smaller loan with a better interest rate will work.

Step 3. Consider different loan products.

Consider the following options:

  • Bank loans — The cheapest financing option. Interest rates can be as low as 5%. There are some hurdles: You’ll need a great personal credit score, your business should be profitable and you’ll need personal or business assets to use as collateral.
  • SBA loans — Slightly more expensive than bank loans and easier to qualify for. Rates range from 5% to 10%.
  • Medium-term alternative loans — A faster online counterpart to SBA loans or bank loans. Interest rates may be as high as 20%, but you can get approval in less than two weeks.
  • Short-term alternative loans — Just three to 18 months to be repaid with daily or weekly repayments. Interest rates can be very high, but you’re paying for convenience and quick approval. These may be the best (or only) alternative you have if you’ve been in business for less than a year or you have a weak credit score.

Step 4. Get your loan documents in order.

This includes all your financial statements and tax documents. (Depending on your situation, you may need an audit, review or compilation.) No matter which options you choose, you’ll need paperwork to move forward.

  • Be aware the more difficult it is to qualify for the loan, the more paperwork is required.
  • Expect to be asked for your credit score, your average bank balance, how long you’ve been in business, your annual revenue, a profit and loss statement and a balance sheet, as well as personal and business tax returns.
  • Take into account costs, which may include application fees, origination fees, guarantee fees for SBA loans, credit check fees, prepayment fees for paying back the loan early, and late payment fees.

A final tip

This is just an introduction to a complex process. Getting a business loan is a big step, so whatever you do, be sure to get the advice of a financial professional before moving forward.

KRSCPAS.com is accessible from your mobile device and is loaded with tax guides, blogs, and other resources to help you succeed. Check it out today!

How to Decode Box 1 of Form W-2

Here’s help for understanding how your compensation is handled on Form W-2

Box 1 of Form W-2 shows the employee’s total compensation that is subject to taxation for the year. Per an article published by Forbes, “This tends to be the number most taxpayers care about the most.” Consequently, there’s no room for error.How to Decode Box 1 of Form W-2

Below are inclusions and exclusions for Box 1 plus a brief explanation of the differences among Box 1, Box 3 and Box 5.

Learning these differences can help you decode your W-2 more easily.

What goes in Box 1?

All taxable wages, tips and other compensation should go in Box 1. This includes:

  • Hourly earnings, including overtime and premium pay, and salaries.
  • Vacation, sick, PTO and holiday pay.
  • Bonuses, commissions, prizes and awards.
  • Noncash payments, such as taxable fringe benefits.
  • Tips the employee reported to the employer.
  • Business expense reimbursements made under a non-accountable plan.
  • Accident and health insurance premiums for 2%-or-more shareholder employees if the company is an S corporation.
  • Taxable cash benefits under a Section 125, or cafeteria, plan.
  • Employer and employee contributions to an Archer Medical Savings Account.
  • Employer contributions for qualified long-term care if coverage is provided through a flexible spending arrangement.
  • Group-term life insurance that exceeds $50,000.
  • Taxable education assistance payments.
  • Any amounts you paid toward the employee’s portion of Social Security and Medicare taxes.
  • Designated Roth 401(k), 403(b) and 457(b) contributions.
  • Payments to statutory employees who are excluded from federal income tax withholding but not from Social Security and Medicare taxes.
  • Insurance protection cost under a compensatory split-dollar life insurance arrangement.
  • Taxable employer and employee health savings account contributions.
  • Taxable amounts paid to a nonqualified deferred compensation plan.
  • Taxable moving expenses and expense reimbursements.
  • Compensation made to former employees who are on active military duty.
  • All other forms of taxable compensation, such as fellowship grants and scholarships.

What’s not in Box 1?

Box 1 should not contain:

  • Expense reimbursements — such as for transportation, lodging and meals — made under an accountable plan.
  • De minimis fringe benefits. These are occasional benefits with a value no more than $100.
  • Pretax contributions made to a retirement plan.
  • Pretax benefits, such as health insurance, flexible spending account and HSA offered under a Section 125 plan.
  • Other nontaxable wages and pretax benefits.

What are the differences among Box 1, Box 3 and Box 5?

  • Box 1 = Total taxable wages for the year.
  • Box 2 = Total federal income tax withheld from Box 1.
  • Box 3 = Total wages subject to Social Security tax.
  • Box 4 = Total Social Security tax withheld from Box 3.
  • Box 5 = Total wages subject to Medicare tax.
  • Box 6 = Total Medicare tax withheld from Box 5.

The total wages for Box 3 and Box 5 may differ from the amount in Box 1 because not all taxable wages are subject to the same taxes. For example, some wages are subject to federal income tax but not to Social Security and Medicare taxes, and vice versa. To accurately compute Box 1, Box 3 and Box 5, you must know which federal taxes should be withheld from the taxable wage in question.

We’ve got your back on taxes and compensation

If you’re interested in learning more about what you can and cannot deduct, or other ways to manage your taxescontact KRS today for a complimentary initial consultation.

 

Estate Planning for Those Under 40

The earlier you start planning, the more choices you’ll have

Get started on estate planning while you're young saves hassles laterWe all live as if we have decades ahead of us, dealing with the present — we can’t know the future. And that’s why now is a great time to get a jump on estate planning.

Do your family and loved ones know what accounts you have, where your financial information is and what your wishes are? Now is the time to tell them. If you start now, your plan will help keep your loved ones from becoming stressed if you suddenly become disabled or pass away.

Learning about estate planning

You can begin to educate yourself about estate planning. For instance, what should you be looking for in an estate planning attorney? You can interview several to see whom you feel most comfortable with. You can also explore estate planning strategies: Some organizations have free small-group events to share an understanding of the basics of estate planning.

You can start formulating how you’d want to be memorialized — how about creating a recording to share with your loved ones to help them by making the tough decisions in advance?

Getting started on your plan

Estate planning isn’t just for wealthy people — you don’t have to wait until you build up more savings. You may have a child or spouse who is financially dependent on you, so you don’t want to ignore your estate plan. Take these steps to be proactive:

  • Designate beneficiaries.
  • Designate a health care proxy to make medical decisions for you if you can’t.
  • Review asset titling — titling assets jointly with rights of survivorship is an easy way to ensure that your property passes to your heirs without delay.
  • Consider establishing a trust — in many ways these can be even more effective tools than wills.
  • Do some tax planning — although the federal estate tax affects only the wealthiest people, there are other tax issues, including state estate taxes.
  • Select guardians to care for minor children.
  • Plan ahead — an accident can result in an inability to make legal decisions; a durable power of attorney will name someone to act in your place if you are incapacitated.

Documents for your plan

Among the documents that are part of an estate plan, consider a will, life insurance, and a power of attorney. You can think of a will as a road map outlining how your property will be distributed if you’re disabled or die. Meet with an attorney and tell her or him what your assets are, who you want to leave them to, and that you want it all to be simple.

In crafting a will, name a trusted friend or family member as the executor to help shepherd your estate through any court-supervised process, such as probate. You may want to consider life insurance, particularly because you haven’t accumulated lots of money yet. You’d want your family to have assets to live on. You can choose a less expensive option such as a term policy for a set number of years.

We’ve got your back on estate planning

It’s never too early to start thinking about estate planning. KRS CPAs offers unbiased financial and tax guidance to help you realize your specific goals and vision. Contact KRS managing partner Maria Rollins at [email protected] or 201.655.7411 to discuss your situation.

IRAs to Charity: A Useful Estate Planning Technique

Make your favorite charity a beneficiary of your IRAsSave taxes with this smart estate planning strategy

If you’re like many people, you have a great deal of your wealth tied up in traditional IRA accounts. Why? The tax-free benefits have motivated you. But there’s going to come a time when you—or your heirs—will have to pay taxes on this money. Instead of worrying about what you’re going to do about that, you can follow a tax-saving strategy that considers designating your favorite charity or charities as beneficiaries of all or a portion of your IRAs. Then you can leave other assets to family members and other heirs.

IRAs and estate taxes

Your IRAs are considered part of your estate when you die, which means they are subject to estate taxes. Although very few people are subject to the federal estate tax, some states have lower thresholds for estate taxes. Also, your heirs will have to eventually withdraw the funds, and typically will pay income tax. This could be substantial, if your heirs are already in a high bracket.

Fortunately, there’s a tax-smart solution: leave some or all of your IRA to charitable beneficiaries while leaving other assets to heirs of your choice. Leaving money directly to charities by designating them as account beneficiaries is very tax-efficient. First, it avoids estate tax, since the IRA is removed from your estate. Second, there’s no federal income tax due on IRA money. (You may get a state tax break too.) No income taxes are due when your favorite tax-exempt charities make withdrawals from the IRAs.

This strategy allows you to leave more to your favorite charities and more to your loved ones while keeping as much as possible from the IRS.

Leave Roth IRAs to your loved ones

One final word, however. This strategy generally applies to traditional IRAs. Naming a charity as the beneficiary of your Roth IRA is generally inadvisable. Leave Roth balances to your loved ones by designating them as account beneficiaries. Why? As long as your Roth IRA has been open for more than five years before withdrawals are taken, all withdrawals will be federal income tax-free since the money went in after taxes. But if you leave Roth IRA money to charity, this tax break is wasted. (Roth IRA inheritance rules differ from the rules for traditional IRAs in several key ways.)

Looking at the Big Picture

Of course, this is just part of your estate plan, and there are lots of complexities. A giving strategy that makes sense for one family may not be appropriate for another. Also, the new tax law has changed the scenario for many.  Finally, there are various limits and provisions you should be aware of before you proceed.

The bottom line? Talk to a qualified financial professional about your charitable goals and any traditional or Roth IRAs you have in order to take care of both your family and your designated nonprofits in as efficient a way as possible.

We’ve got your back on estate planning

It’s never too early to start thinking about estate planning. KRS CPAs offers unbiased financial and tax guidance to help you realize your specific goals and vision. Contact KRS managing partner Maria Rollins at [email protected] or 201.655.7411 to discuss your situation.

What Is Tax-Efficient Investing?

Keep taxes in mind when investing

Tax Efficient InvestingAvoiding taxation should not be the only goal, or even the main goal, of your investment strategy.

Still, you always have to keep taxes in mind to make sure you’re not unnecessarily sending too much of your money to the government.

Managing Your Investments

Keep on top of your tax losses. No one likes to see their investments fail, but there are hidden tax savings there. Tax-harvesting strategies take advantage of losses for tax benefits when you rebalance your portfolio if you comply with IRS rules on the tax treatment of gains and losses.

Note that losses can offset up to $3,000 in taxable income in realized investment gains annually. If losses exceed deduction limits in the year they occur, you may be able to carry them forward to offset gains in future years.

Also watch out for capital gains. Securities held for more than 12 months and sold at a profit are taxed as long-term gains, with a top federal rate of 23.8%. For short-term gains, the tax rate can hit 40.8%. Timing can be everything.

Consider tax-exempt securities. Municipal bonds typically are exempt from federal taxes and may receive preferential state tax treatment. However, choose carefully before jumping into them. If you have a low tax rate in retirement, for example, it may not be necessary or even wise to concentrate so heavily on avoiding taxes.

Managing Your Taxes

Sometimes it’s better to pay taxes later rather than now. For example, 401(k)s, 403(b)s, IRAs, and tax-deferred annuities let you postpone your taxes until you are retired and thus likely in a lower bracket. Contributions you make may reduce your taxable income if you meet income eligibility requirements, and typically, investment growth is tax-deferred.

On the other side of the coin are Roth IRAs, which don’t give you an immediate tax break, since you use after-tax dollars. But this can help you later. For example, you may be in a low tax bracket now, so you put money into a Roth IRA. Investment gains are tax-deferred. When you withdraw the money, you don’t have to pay taxes at what could be a higher rate.

Reduce Taxes through Charity

If you itemize, you can deduct the value of your charitable gift from taxable income, but be aware that limits apply. Consider contributing appreciated stock, which may help you avoid capital gains taxes. Also try a donor-advised fund in a high-income year. These funds let you make a donation, take an immediate deduction and spread the giving over a period of time.

Of course, this is just an introduction to a complex topic — there are limits and exceptions to these strategies. Tax law is detailed, especially when it comes to investments, and a slight miscalculation on your end can lead to an unexpected tax bill down the line.

We’ve got your back on tax efficient investing

Taxes are a key part, but not the only part, of an investment strategy and you need to work with tax and financial professionals to make sure your strategies are aligned with your goals.Contact KRS managing partner Maria Rollins at [email protected] or 201.655.7411 to discuss your situation.

The Final Responsibility: Being an Executor

An executor of a will carries out the last wishes of someone close who has died.

The executor ensures that the rules that govern the administration of a probate estate are followed.

Here are three things you need to know about this important job.

The Final Responsibility: Being an ExecutorExecutors can get help

A lot of responsibility is involved in being an executor. Gathering paperwork tops the list. You’ll need to find all the assets of the estate. You have to report to the probate court with jurisdiction. There will be complex technical and legal language to decipher, as well as finding ways to communicate with grief-stricken family members at a time when they’re least able to rationalize. You’ll need to spend many hours where the deceased person lived, even if that means a lot of travel.

Fortunately, you can get professionals to help you. You can hire lawyers, accountants and other professional advisors on behalf of the estate to assist with tasks like preparing the final income and estate tax returns, and ensuring that the financial assets are invested properly during the probate process. As executor, you’re not expected to know everything about the process, but you should know when you need help.

Be aware of all accounts, even those you don’t control

You never need to exercise control for accounts that have beneficiaries, like retirement accounts and insurance policies. And property held in joint tenancy with rights of survivorship pass directly to the survivor. However, you still need to be aware of these assets and potentially account for them. The estate might owe taxes on these proceeds — you as executor have to collect a prorated share of any taxes due from those who inherit the policy benefit. Being aware of all this is crucial to doing a complete and thorough job.

Dealing with family battles

If the deceased person specifically wanted unequal amounts of property to go to different people, resentment bubbles up. You may find yourself in the epicenter of such a contentious debate. But the role of executor is separate — you treat family members fairly and defend the rights of heirs. It’s a hard line to walk, so professionals can help in dealing with any turmoil to keep you out of trouble.

Being the executor of a will is an important job and needs to be done well. Keeping this in mind, you’ll do your best to make sure that your loved one’s wishes are met and that the person’s heirs receive what the decedent intended.

We’ve got your back with an estate executor’s checklist

Being an executor of a will can be challenging. KRS CPAs can help. Visit our estate planning and administration page and download our helpful executor’s checklist. Then contact us for assistance.

How to Value Your Business

This overview can help you understand the approaches, methods and factors important to valuing your business

How to Value Your BusinessRevenue Ruling 59-60 was issued by the IRS to “outline and review in general the approach, methods and factors to be considered in valuing the shares of the capital stock of closely held corporations for estate and gift tax purposes.”  This revenue ruling is regarded as the foundation of modern business valuation, and although issued sixty years ago, the approach, methods and factors set forth therein are still used in every business valuation, including valuations of business entities other than corporations.

Revenue Ruling 59-60 lists the following eight fundamental factors that require careful analysis in each case.

  1. The nature of the business and the history of the enterprise from its inception.
  2. The economic outlook in general and the condition and outlook of the specific industry in particular.
  3. The book value of the stock and the financial condition of the business.
  4. The earning capacity of the company.
  5. The dividend paying capacity.
  6. Whether or not the enterprise has goodwill or other intangible value.
  7. Sales of the stock and the size of the block to be valued.
  8. The market price of stocks of corporations involved in the same or a similar line of business having their stocks actively traded in a free and open market, either on an exchange or over the counter.

Approaches to valuing a business

The three basic approaches in valuing a business are the asset approach, the income approach, and the market approach.  The factors listed above include the analysis required to value a business under each of these approaches.

Asset approach

Under the asset approach, the value of the business is the value of the net tangible assets.  This method does not consider goodwill or other intangible assets and is most commonly used in the valuation of real estate entities.  This method may also be applicable to unprofitable businesses and those in or close to liquidation.

Market approach

The market approach consists of two methods, the guideline public company method and transaction method.  Under the guideline public company method, the financial attributes of the subject company including but not limited to sales, earnings, cash flow, total assets, net book value are compared to the same attributes of publicly traded companies in the same or similar industries, and with fairly complex analysis, the value of the subject company is determined by comparison to the stock price of the publicly traded company.  This method is generally not applicable to small businesses because they are not usually comparable to publicly traded companies, even those in the same industry.

Under the transaction method, the value of the subject company is determined based on analysis of and comparison to the financial attributes of similar companies that have sold in private transactions.  This method is used when there are enough comparable transactions, and enough financial information about these transactions is available.

Income approach

Under the income approach, a measure of income (generally normalized cash flow) is capitalized or discounted to estimate the value of the company.  Capitalization is used for historical cash flow; discounting is used for projected cash flow.  The capitalization rate is based on risk, that is, the risk that the expected cash flow will not be realized.  Common closely held business risks considered in this process include customer or supplier concentration or diversification, depth of the management team, product obsolescence, prospective competition, and the state of the industry in which the company participates.

Learning more about business valuation

This is a ten-thousand-foot view of business valuation.  Future posts will provide detailed information of things discussed here.  Many of the factors considered are controllable, and factors reducing business value can often be improved.  Those who are considering the future sale of a business and want to maximize its value should start thinking about this now.  If you wait until you are ready to sell, that is usually too late.  The first step is to understand the current value of the business, and what are the factors driving that value.  After that, the valuation can be periodically updated, which will be a gauge of progress in increasing value.

Visit our business valuation page to learn more about our business valuation services and  contact us if you want to discuss planning the future of your business.

Pay off Your Student Loans

Pay off Your Student LoansIt is payday and you see your paycheck hit your bank account just in time to pay your student loans.  How depressing.

Paying your student loans may seem like it will last forever, but there are ways improve your repayment plan and pay off your loans faster.

Pay more than the minimum payment

This is one of the fastest ways to relieve your student loan debt.  These days, most payments are done online. You can simply go online each month and pay your minimum payment, plus an additional payment.  This additional payment can be whatever amount you feel comfortable paying at that time. Some months you may want to make a larger additional payment than other months.  For instance, in a month where you get a bonus or a money gift, you may want to put this “found money” towards your student loans.

It is important to ensure that all extra payments are applied to principal and not the next month’s minimum payment.  Some lenders may require a written letter specifying that any additional payments made are applied to principal of the loan.  Other lenders may have an option online when a payment is made to categorize the extra payment towards principal. By doing this, you can reduce the interest on your loans.  Keep in mind that most lenders reduce your interest rate by setting up automatic payments. You should also always pay towards your highest interest loans first as interest accrues faster on these loans.

Consolidate and refinance your loans

Interest rates on student loans can vary from 4% to 9%.  If you’re like the average graduate, with three to six different loans with differing interest rates, and you are a good candidate refinancing at a lower interest rate. By consolidating, you also free yourself of the burden of making multiple monthly payments.  Your consolidated loan will have one monthly payment.

This approach is not for everyone.  You would only want to refinance if you can reduce your interest rates.  Right now, refinancing rates on student loans are as low as 3%. Banks that offer student loan refinancing and relief include NerdWallet, Sofi, and Citizens Bank.  Each bank and lender offer different programs and individualized rates, which are usually based on credit history and annual income.

Student loan interest deduction

Don’t wait to pay your student loans.  If you are in loan deferment, a grace period, or in school, make payments sooner.  During these periods where you are not paying your loans, interest is accruing which increases your overall loan obligation.

Some good news: the IRS offers a student loan interest deduction of up to $2,500 per year.  Keep in mind that you may not be able to deduct the full $2,500, as this deduction phases out between $65,000 and $80,000 for a single taxpayer, and $130,000 and $160,000 for a married filing jointly taxpayer.

When filing your taxes, there is no need to look through your loan statements to calculate the interest paid.  Your lender will provide you with Form 1098-E, which will show the total student loan interest paid in the current year.  You will receive one form for each loan.  If you are married, you can also deduct student loan interest paid by your spouse if you file a joint tax return.  The only requirement is that you must be legally obligated to repay the loan.  This means that you or your spouse must be the responsible party for the loan.

We’ve got your back

It is important to tackle student loans early in your career.  By doing so, you will improve your credit, become student loan debt-free, and start saving for your future.

Lance Aligo, CPA, MSA, is a senior accountant at KRS CPAs, LLC, located in Paramus, NJ.  You can reach him at [email protected] or 201-655-7411.

What Changes With the New Taxpayer First Act?

The Taxpayer First Act of 2019 is redesigning how the IRS works with taxpayers, even though it may take a while for many of the provisions to take effect.What Changes With the New Taxpayer First Act?

Some experts have highlighted the following aspects of the bill as especially important:

An independent appeals process. Taxpayers and small businesses will be able to challenge the IRS’ position without undertaking the cost and expenses of court. IRS Appeals will be an independent unit that grants taxpayers access to case files. Taxpayers will be able to protest if denied an appeal.

Innocent spouse treatment. The new law requires the U.S. Tax Court to take a fresh look at innocent spouse cases without taking previous decisions into account.

Modification of procedures for issuance of third-party summons. This is an important protection for taxpayers, especially small-business owners. It discourages the IRS from bypassing the taxpayer and contacting third parties — such as financial institutions — instead for information. The IRS should give taxpayers a meaningful opportunity to provide the information it is seeking prior to its contacting third parties. In practice, the IRS should provide the taxpayer with an understanding of what the issue is, what information is being requested and how the requested information relates to the issue.

Office of the National Taxpayer Advocate. The Taxpayer First Act has taken a strong approach with the Advocate’s issuance of Taxpayer Advocate Directives, which focus on systemic problems taxpayers deal with. Once they are issued by the Advocate, the IRS should comply within 90 days. The Advocate Annual Report will identify any TAD that is not honored by the IRS.

Credit card payments. The IRS is now allowed to directly accept credit and debit card payments for taxes; the taxpayer must pay any processing fees. The Act also requires the IRS to try to minimize processing fees when entering into contracts with the credit card companies.

Whistle blower reforms. The Act provides protections from retaliation and allows for better communication with whistle blowers about the status of their claims.

Cyber-security and identity protection. The IRS will now have to let taxpayers know whether it suspects there is evidence of identity theft. The Agency will explain to taxpayers how to file a report with police and how to protect themselves against additional harm resulting from the identity theft.

Taxpayer Act levels the playing field

Rep. Kevin Brady, R-Texas, ranking member of the Ways and Means Committee, was quoted as saying the Act “levels the playing field to ensure taxpayers have the same information as the agency, better protects our taxpayers’ information, and reins in past IRS abuses to guarantee families and local businesses never have to fear having their accounts and property seized without fair and due process.”

As with many new laws, it will take some time to see what specifically the effects are. The legal provisions are complex and will require interpretation over time. We’ll be keeping an eye on the developments.

We’ve got your back

The new tax code is complex and every taxpayer’s situation is different – so don’t go it alone! Contact KRS managing partner Maria Rollins at [email protected] or 201.655.7411 to discuss your situation.

Tax Rules for Vacation Home Rentals

Tax Rules for Vacation Home RentalsGet the most from your vacation home rental property by knowing the tax rules

Summer is the time of family vacations, sun, sand and beaches. It’s also the time when a vacation home may be used to generate additional cash flow through rental.

Part-time landlords need to remember that, in many cases, the Internal Revenue Service expects them to report the extra income.

Short-Term Rentals

In general, if a taxpayer rents their vacation home for fewer than 14 days out of the year, the income is tax free and the property is considered a personal residence.  Under this scenario, taxpayers are not required to report any rental income on their tax return.  However, expenses attributable to the rental cannot be deducted, such as cleaning fees or rental commissions.

More than 14 Rental Days

If a taxpayer’s rental days are above the 14-day threshold, the income is required to be reported. Under this scenario, a taxpayer can also deduct a variety of direct rental expenses such as licenses, advertising and rental commissions.

Other expenses such as repairs, mortgage interest, property taxes and utilities are deductible on a prorated basis based upon the number of days a taxpayer rented the home out.

Claiming Expenses on Rental Property

When filing taxes on a rental property, an individual will use IRS Schedule E: Supplemental Income and Loss. The IRS provides an extensive listing of deductions in Publication 527, however common expenses include:

  • Real Estate/Property Taxes
  • Insurance
  • Cleaning
  • Repairs and Maintenance
  • Depreciation
  • Legal and Professional Fees
  • Advertising
  • Utilities
  • Commissions

We’ve got your back

For additional information on the taxability of your vacation home rental, contact Simon Filip, the Real Estate Tax Guy, at [email protected] or (201) 655-7411.