Hello, I have 3 rental houses. Can I claim my home internet cost as a business expense and if so, would I just claim a third of the cost on each house? Also, can I do the same for my cell phone? That is the only way I have to connect with tenants other than driving over. I also use the phone for payment. Thanks in advance!
Yes, you can deduct those expenses if they are needed to operate your rentals. You are correct to enter a third of the total for each rental unless you also use it for personal use. If you do use it for personal use, subtract that amount out before dividing by three. Record how you arrived at the numbers in case you are asked in the future to substantiate your expense.
If you have other questions about this, ask in the comment section below.
does this also apply for other bills such as cellphone which is also needed to conduct rental business? also are these and other broad business expenses (umbrella insurance for entire portfolio/office supplies/computers/software) necessary to allocate to each rental property on a prorata basis? for some reason I was thinking these high level expense would be best entered on a schedule C in just the regular business section of turbotax home & business. however I think not showing income (rent) at the business level but rather only on the rental level (sch E) might prove problematic for tax accounting?
in my mind all of these general costs are part of my entire rental effort including possible costs such as a home inspection or option fee on a contract I walk away from. How would that be allocated to each property since it was costs which were ultimately unsuccessful and have not Sch E property associated with them.
I myself have 3 rentals and have found that claiming cell phone and internet against them has *ZERO* impact on my tax liability. In other words, I'm advising you to not waste your time. Besides, home office expenses for folks like us with residential rental real estate is not allowed anyway. Only if you are a real estate professional can such expenses come into play. But even then most likely, it still has zero impact on your tax liability since it is *VERY* uncommon for residential rental real estate to show a taxable gain each year - especially if you have a mortgage on the property(s).
To further reiterate.
I don't waste my time with claiming any phone expenses. But if I advertise the rental on the internet and pay for that advertising, then I claim that expense in the "Advertising" category for the rental(s) that specific advertisement applies to. But I don't waste my time with claiming the monthly cost of Internet in my house where I live, since I'd be hard pressed to prove to the IRS that I use it for even 1% business use against my rentals.
Overall I really don't pay for any advertising. I find that a "for rent" sign in the front yard will usually start the phone calls before I can even get home to list it on an advertising website. But when you're in a situation like my son is, that's different. He owns a condo unit he rents out, and yard signs of any type are not allowed.
I agree ... taking deductions for a phone & internet that you use personally (even a partial deduction) would be very hard to support in an audit situation .... you would be hard pressed to support the deduction for the phone/internet services on the Sch E if you also use the same personally. In the old days of land lines you could not deduct the first line into the home ... only a second dedicated business line or additional features would be allowed .... and this now goes for the common expenses of cell phones & internet services. The base fees for each of these is not deductible however if you pay for extra services or speed then only that portion of the bill *MAY* be a deduction on the Sch E HOWEVER you must keep accurate usage records of business vs personal usage which is not worth your time or effort for the couple of dollars difference on the tax return.
Also, unless tax laws have changed (and I don't think that have for this) home office expenses are not even allowed on the SCH E. There's no category for it, and it's not addressed in any of the IRS documents related to residential rental real estate. Now you'll hear the argument that a real estate professional can claim HO expenses, and that's true. But a real estate professional is most likely reporting earned income on SCH C where HO expenses are allowed. Remember, rental income is passive (SCH E) and not earned.