Ah, Tax Season. Everyone’s favorite time of the year on the Outer Banks. Kidding.

There is a silver lining! If you own a vacation rental home on the Outer Banks, here’s a top 10 list of tax deductions to discuss with your tax specialist:

1. Mortgage Interest:

• Deduct the interest paid on the mortgage. This often constitutes a significant portion of your overall deductions.

2. Property Management Fees:

• Expenses related to professional property management services, such as advertising, maintenance, and administrative fees, can be deducted.

3. Utilities and Maintenance Costs:

• Deduct expenses for utilities, repairs, and maintenance. This includes costs for landscaping, cleaning services, and any repairs necessary to keep the property in good condition.

4. Depreciation:

• You can depreciate the property’s value over time. This deduction spreads the cost of the property over its useful life. OR, alternatively you and cost segregate this depreciation all at once. *email me separately if you want to learn more about this or be connected to our Cost Segregation specialist.

5. Travel Expenses:

• If you travel to manage your OBX rental, certain expenses like airfare, accommodation, and meals may be deductible.

6. Home Office Deduction:

• If you use a portion of your home exclusively for managing your rental properties, you may be eligible for a home office deduction. *careful with this one, there’s rules around this that don’t make it a simple deduction.

7. Insurance Premiums:

• Deduct the premiums you pay for insurance coverage related to your vacation rental property, including property and liability insurance.

8. Property Taxes:

• Property taxes are generally deductible.

9. Furniture and Appliances:

• The cost of furnishing and equipping your vacation home, such as furniture and appliances, may be eligible for a one-time deduction or depreciated over time.

10. Legal and Professional Fees:

• Fees paid to attorneys, accountants, or other professionals for services related to your vacation rental business can be deducted.

One thing I recommend that I learned the hard way: open separate checking accounts for each rental property. That way, all the expenses can be sent straight to your accountant already categorized. Remember that deductions can vary based on factors like your personal use of the property and the amount of time it’s rented out. And of course, call or email us if you have any questions. - Sarah Spencer, The Spencer Team