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I recently met with my tax accountant — early this year, as I had a hunch I would have to pay in. I’m self-employed, and have been paying taxes through payroll, but hand’t been withholding quite as many as I should have. That, and I haven’t done much work on the duplex this year, so my “loss” from the duplex venture isn’t quite as great. One thing that could have helped a bit – keeping a better mileage log.
I just paid my property taxes this morning. I’ve chosen not to escrow my taxes and insurance with my mortgage payment, so that I can save the money up in a bank account through the year, and earn interest on it. (5% in an Emigrant account is nothing to sneeze at). So that means that twice a year I need to log into the county assessor’s website and send a payment via e-check (of course, if I planned ahead, I could also snail-mail it). They do keep going up, though. I’ve chosen not to raise the rent on my tenants if they signed another year lease, so the increased property tax bill just cuts into my profits. At least, though, the money that I pay in property taxes is deductible (on my 1040 for my personal half, on my schedule E for my rental unit).
I showed a loss of several thousand dollars on my schedule E this year, from expenses related to my duplex – many of which would be nondeductible expenses that I would have as a homeowner…
Filling out the actual paper forms to do your taxes (yes, I do it the old-fashioned way, on actual paper), isn’t hard. What is hard, is keeping track of your expenses throughout the year, so that you know what to put on those forms.
Throughout the year, I keep track of the following for my duplex expenses…
Tax benefits are one of the biggest reasons that buying a duplex is a good idea. Yes, the tax benefits of owning a duplex are pretty nice, especially that whole depreciation thing. However, the catch here is that your taxes get a LOT harder to do, once you own a duplex. I went from being an apartment dweller who filed a simple 1040EZ to having a bunch of (fairly) detailed schedules to fill out every year. And while the schedules themselves aren’t actually that hard, once you figure out what you’re doing (or find someone to pay to figure them out for you), the biggest part is something that only you can do: Keeping track of your expenses. Well. In an organized fashion. Preferably throughout the year.