Friday, September 11, 2009

Claim Repair Deductions For Rental Property On Schedule C

Schedule C is are of your Form 1040 tax form. It is used to report business income for self-employed individuals. It allows individuals to deduct expenses related to the generation of their reported income. At times, you may find yourself making repairs on property that you rent out for income, or you may need to get other types of business property like a car repaired. While the repair expenses are generally deductible, you need to look at the type of repairs and on the type of property.


Repairs vs. Improvements


While you can deduct the cost of both repairs and improvements from your taxes, each type of expenditure is treated differently. Improvements add to the value of the property or noticeably extend its life. Improvements must be capitalized through depreciation, but repairs can be deducted as an expense during the year it is incurred.


Property


One type of rental property that you might need to repair is real estate, in particular homes and apartments that are rented for income. As the owner of the property, you will need to maintain it in order to rent it out. If the work you do on the property is an incidental repair or property maintenance, then you can deduct the cost of the repairs on line 21 of Schedule C, which is "Repairs and maintenance." This reduces your income dollar-for-dollar. It reduces your profit, but it also reduces the taxes you owe on that profit.


Leased Property


Some businesses rent or lease equipment or machinery in order to conduct their business. Depending on the type of rental agreement you sign, you may be required to have the equipment maintained and do minor repairs. The costs you incur in doing this can also be deducted on line 21 of Schedule C.


Vehicles


A common type of rented property is a leased company car. You can either deduct the actual costs of operating a leased car from your taxes or make a deduction based on the standard mileage rate. If you used the vehicle for hire or had five or more vehicles used simultaneously in your business, then you have to take actual expenses. If you already started using the standard mileage rate for a leased vehicle, you can't switch to actual expenses. Repair costs, gasoline, oil, insurance, tires, license plates and other costs can be deducted as actual costs. The deduction is made on line 9 of Schedule C, which is "Car and truck expenses." You rent or lease payments are deducted on line 20a.

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