I own a single SFR rental house with two other people. The two other people became part owners Jan 1, 2024. I manage all off the property aspects... obtaining tenants, communications with tenants, processing financials & payments to owners, performing bi-annual inspections, etc. I also perform labor & purchase materials for maintenance, repairs, cleaning & prep for transitions, as well as capital improvements (flooring/windows/ bathroom updates). I want to set up a property management agreement with the other owners to be compensated for my work that would be allowable as a deduction on the rental tax return and also allow my labor to be included in the capital improvements for depreciation. My thoughts are as follows:
- Create a Property Management Agreement (PMA) that specifies a % of rent to cover the basic monthly and transition property management.
- Also, in the PMA include an hourly rate for labor for maintenance & repairs performed as well as some language for labor & materials for capital improvements.
Any of the payments I receive will be claimed as ordinary income, but as I am retired, and not yet collecting any retirement payments, my "income" will be less than the standard deduction so I'll have no tax liability.
My questions are:
- Will this agreement allow us to deduct the expenses on our rental return?
- Will this agreement allow us to capitalize my labor (& costs) involved in capital improvements?
- There will be a loss on the rental in 2024 as it sat empty for many months due to work on the capital improvements & other reasons. I'll have no income /tax liability in 2024, but in 2025 I have another property I plan to sell that will have a capital gain. Will I be able to carry-forward the 2024 loss to offset the 2025 capital gains?
Any suggestions or examples as to the content of a PMA are also welcomed!
Many thanks!
