South Lake Tahoe Vacation Rental Tax Deductions

Many home buyers in South Lake Tahoe are thinking of renting out their home as a vacation rental in order to offset the cost of ownership. This is a great way for buyers to afford a bigger or more expensive property that may have been out of reach with out any rental income. Although the vacation rental activity is down along with housing prices, there is still potential to attract renters during our peak winter and summer seasons, especialy holidays.

If you do rent out your home in South Lake Tahoe, there are some great tax deductions that you do not want to miss. It is important to ask your CPA about the allowed deductions, but here are deductions that owners of rental properties can take as listed on IRS.gov.

• Mortgage interest
• Property Taxes
• Operating expenses
• Depreciation
• Repairs

You can deduct the ordinary and necessary expenses for managing, conserving, and maintaining your rental property. Ordinary expenses are those that are common and generally accepted in the business. Necessary expenses are those that are deemed appropriate, such as interest, taxes, advertising, maintenance, utilities, snow removal, and insurance.

You can deduct the cost of repairs that you make to your rental property. A repair keeps your property in good operating condition and does not materially add value to the property. Examples are painting, fixing leaks, replacing broken doors and other parts of the rental property.

You may not deduct the cost of improvements. An improvement adds to the value of the property, prolongs its useful life, or adapts it to new uses. The cost of improvements is recovered through depreciation. Examples are adding a deck, a new fence, or a roof.  Your CPA will be able to calculate the depreciation of the improvements so that the cost of the improvement will be deducted over time.

In my mind, the best deduction for a vacation rental property in South Lake Tahoe is travel expense! Many real estate investors acquire real estate in the places they like to visit. Each time they travel to the property, the travel costs are a deductible expense. That means that if you purchase a rental property in South Lake Tahoe, your next visit to your home will be tax deductible!

This blog post was just a highlight of the available tax deductions for rental properties. I am a real estate agent in South Lake Tahoe, not a tax expert, so make sure to check with your CPA for allowable tax deductions and recent tax changes! For more information regarding properties for sale in South Lake Tahoe, contact Brent Johnson today!