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Don’t Forget To Send Out Your CRPs!

said on January 30th, 2017 categorized under: Paperwork, Paperwork, Paperwork!

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If you currently own rental property in the state of Minnesota, it’s that time of year. Property owners have until January 31, 2017, to complete and distribute Certificates of Rent Paid (CRP).

You must complete and distribute a CRP to each person who from you unless your property is tax exempt.

Without a CRP, tenants cannot take advantage of the Homestead Credit Refund or Renter’s Property Tax Refund.

Failure to provide the CRP on time can result in a fine of up to $100 for each incidence.

If you purchased the property last year, or your tenant only paid a portion of the rent, your CRP should be pro-rated to your length of ownership or the amount of rent you actually received.

For further instructions, or to download the form, click here

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3D little human character standing on a clock at five to twelveIt’s once again that wonderful time of year when Minnesota duplex owners and landlords are required to fill out Certificates of Rent Paid (CRPs) for each of their tenants.

Fun. I know.

Landlords must complete and give one CRP to each married couple or unmarried adult who lived in the rental property.  In the case of unmarried adults, you must give a tenant a CRP; even if his or her name isn’t on the lease.

You are not responsible for figuring out how much each tenant paid. The state says you must show that each paid the same amount of rent, regardless of what was actually paid.

If you bought or sold the property at some point in 2012, you must issue CRPs for your period of ownership.

CRPs must be completed and delivered to tenants no later than January 31, 2013.

Failure to do so may result in a penalty of $100 for each instance. For example, failing to give four tenants CRPs would result in $400 in fines.

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duplex property manager w-2If you’ve been paying a friend, relative or neighbor to manage your duplex, are you planning on sending them a W-2 at the end of the year?

Minnesota state law requires anyone being compensated for managing a property either be a waged employee of the duplex owners, have a real estate salesperson’s license, or work for a management company that has a real estate license.

Don’t ask me why, but property managers cannot be classified as independent contractors. I’ve asked a number of legal and tax professionals, and no one seems to have a definitive answer. Perhaps it’s due to the regularity of the work they do for duplex owners.

And all fees for a real estate licensee must be paid to that salesperson’s broker, not the agent directly.

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peepsIt’s tax time, which, if you’re a Minneapolis duplex owner, is like Mother’s Day; a great time to remember all the wonderful things your investment property has done for you.

Like pay for itself while giving you the tax benefits of depreciation, mortgage interest deductions, and the ability to write off repairs and improvements for any units you don’t live in as business expenses.

Really. April 15th should be National Investment Property Day, with a line of greeting cards, seasonal chocolates, its own line of Peeps…

While I’m not an accountant or tax advisor, I do know many of these presently exhausted individuals occasionally forget to include the category of land improvements in your depreciation schedule.

This oversight can be costly, because at 15 years, this category has the second fasted depreciation schedule. Only personal property can be depreciated faster; over a stretch of five years.

What qualifies as land improvements? Not to be overly simplistic, but any improvements to the land. Like landscaping. Driveways. A sewer line from the curb to the property. A sprinkler system.

I’m sure your accountant can’t field one more call or squeeze one more hour out of her day right now. But an email might serve as a “just in case” nudge before Friday night.

After that, as a thank you to your duplex, you just might want to give it flowers.

Planted in the yard, of course.

And to be depreciated on next year’s Schedule E.

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lease agreement being signedLet’s face it, we’re all busy.

And among the many challenges duplex landlords face is making sure to follow the letter of the law when it comes to giving tenants property notice for entry, lease renewal, eviction and so on.

In an effort to reduce at least some paper management, many duplex owners have an automatic renewal clause in their lease which extends the terms of the contract past the expiration date of the lease.

While on the surface that appears to help reduce to chase down tenants to execute paperwork, when it comes to Minnesota state law, it can backfire on you.

If you require a tenant to give you 60 days notice, you cannot hold them to it after the initial lease expires unless you serve them with written personally deliver notice or send it via certified mail, 15 to 30 days before they were required to give you notice.

Not that big of a deal really. Unless, of course, you’re busy.

Is there a way to make it easier on yourself?

Change your leases so they require the tenants give you 58 days notice of their intention to vacate. Minnesota state law does not require written notice be served for any period less than two months in length.

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In Over His HeadWhile the procrastinators among us still have time, those who are more organized might like to get working on their Certificates of Rent Paid (CRP).

Minnesota landlords are required to provide their tenants with completed CRPs no later than January 31. The certificates reflect the amount of rent the tenant paid in the previous year, and the amount of property taxes your unit helped pay for (expressed as a percentage of total rent collected for that unit).

The CRP helps tenants qualify for a portion of the property tax refund received on the duplex.

There are income limits for qualification. Households with no dependants can earn no more than $50,030 per year. Income limits increase with the number of dependants, going up to $74,930 with five or more dependants.

The forms are easy to understand and simple to fill out. On occasions when I’ve had multiple units at one location, I’ve made a master copy with the property address, owner name and PID number filled out. I then made multiple copies of it and filled each in with a tenants name and rental history.

Failure to provide tenants with CRPs can result in a $100 penalty for each occurance. If you have more than one rental unit, this can add up in a hurry.

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Stack of hundred dollar bills laid out on top of IRS form,It’s getting close to April 15, so it’s a good time to consider strategies to maximize your tax savings on your Minneapolis duplex.

First, you’ll need to report the income from the property, as well as expenses, on your tax returns.

A good way to simplify this process, is to keep a checking account specifically for your landlord activity.

So what tax deductions can you take as a landlord? Of course, you should consult a certified public accountant for expert advice, but general categories include:

Repairs and Routine Maintenance – if you repair the property, or buy supplies to do so, you may deduct the cost of both.

Depreciation – this is wear and tear to the part of the property you rent out, and allows you to defer taxes until you the time you sell.

Maintenance for Vacant Units – while you can’t take a deduction for the income you lose while a unit is vacant, you can take a deduction for expenses incurred to manage and maintain those units during vacancy.

Wages and Fees – You can deduct the wages you pay people you hire to maintain the building, as well as those you pay to professionals like lawyers or accountants.

Property Taxes And Local Services – As a landlord, you can deduct charges for utilties like water, sewer and trash, as well as local taxes or assesments for street or community improvements.

Insurance Premiums – You may deduct at least a portion of the cost or your insurance premiums.

Expenses for Rental Items – If you rent appliances for the unit, or carpet cleaning machines or lawn mowers to maintain the property, you may deduct those expenses.

Travel and Transportation – If you track the cost and mileage you log to manage your property or collect rent, you may deduct it.

Utitilies – If you install an extra phone line to conduct business related to your property in your office or home, you may deduct that cost. You can also decut the cost of any utilities you provide to the tenants.

Outdoor Painting or Siding – This is at least partially tax deductible.

Explore every category. After all, that’s one of the many reasons you bought a duplex!

First Aid for the Accidental Landlord

said on September 22nd, 2008 categorized under: Paperwork, Paperwork, Paperwork!

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First Aid for Frustrated Sellers

First Aid for Frustrated Sellers

Many sellers in today’s slower real estate market find themselves hemorrhaging severely as a result of either an unsold home after they’ve relocated, or the deep wound of covering two mortgages. In an effort to stop the bleeding, many sellers find themselves unintentionally becoming landlords.
 
While it is perfectly sensible to rent a vacant property, as I’ve often detailed here, there is more to being a landlord than simply sticking a “For Rent” sign in the yard. And the costs of being uninformed can often be even greater than even the initial wound. 
 
In an effort to help some of the people who’ve found themselves in this situation, the Minnesota Multi-Housing Association is offering a seminar on Saturday, September 27, that they’re calling “The Accidental Landlord“.
 
For $29 and two hours of your time, you can not only learn many of the ins and outs of being a landlord, but also get a free MMHA start-up kit. These kits usually retail for around $35, and they contain every possible form you could need, from leases to pet deposits. They’re so great to have, that I often give them to clients who are new to multi-family housing.
To sign up, just click on the hyperlink above.

Comments Off on Why Throw Money Out The Window?

Norwegian SweaterWhenever I first sit down with someone thinking about buying an income property (either to live in or as an investment), I ask them a question:

What, besides mortgage and taxes, do you think is the most expensive thing for a landlord to pay for?

I get all kinds of interesting answers…things like water, mowing the lawn, painting. All of which are wrong.

Come on, confess. There was a point at some time in your life (probably college) when you lived on the top floor of an old building, it got hot in your apartment and you opened the windows. In January.

You weren’t doing it to punish your landlord. Well…maybe. More likely, you were young and simply didn’t understand the relationship between the open windows and the amount of your rent.

Of course, as soon as you bought your first home, you set the thermostat at “arctic” and decided that old, warm Norwegian sweater in the cedar closet was actually timeless and never out of style.

When evaluating a property to buy, it’s important to keep those little life lessons in mind. Given two equal properties, it’s always preferable to buy the one where there are separate furnaces.

That doesn’t mean a shared heating system is necessarily a bad investment. It just means that since the property is going to cost you more to own, it’s wise to purchase it at a lower price.