The Money Mustache Community
Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: Lucky Recardito on December 19, 2020, 01:32:52 PM
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DH and I are small-time landlords (1 rental unit). We just added personal umbrella insurance this year for additional liability protection generally speaking (but also bc of the specific additional risk associated with having a rental property). Wondering if I can/should count part of the premium as a business expense when I do my tax accounting on the rental unit? Obviously not all of it -- but a portion?
If so... what portion? Our rental unit is the other half of the duplex in which we live. I typically attribute 38% of building expenses as rental expenses, based on the divide of floor space in the building. Would that division work here, or is there a more accurate way to think about it?
We're not talking big $$ over here (total annual premium is only about $200) -- but I do like to do things properly...
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I've wondered this myself. I dont have an umbrella policy yet, but will in the future. PTF
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I do not. Haven’t thought about this before though. Anyone actually doing this?
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We’re in the same boat as Papa Bear. Never thought of doing this, but it’s an interesting idea.
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I think you could deduct it, and I think you could use the 38% figure as fairly defensible. You could also do 50/50 based on the notion that it's a duplex.
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We expense it, the entire premium. We need it for our rental properties but they won't issue it to us unless it also covers our personal house. Not my fault they require our home to be covered.
Then again, it's only a few hundred dollars for the year, so it hardly matters one way or the other.
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I would deduct 100% of it if I were you. Would you own an umbrella policy if not for the rental? Probably not.
I typically flip this question around for myself and deduct everything unless I can say the expense is specifically NOT a rental expense.
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Thanks for the input, all! I'm leaning toward deducting part, either 38% or 50%. I won't deduct 100%, because i do think we would have decided to carry an umbrella policy around this time even without the rental, as our net worth is climbing -- so I don't think that logic holds water for me specifically (though I see your point, SwordGuy & SndcxxJ!).
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We only bought it because we have multiple rentals. Therefore, it's a rental expense.
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Not to hijack but anyone have issues with getting denied for umbrella due to too high risk, specifically too much rental property (One minor home insurance claim in 7 years of being a LL).
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Umbrella protects you against personal liability when others are injured and focuses on automobile situations since those are most common. Your umbrella may not even cover business situations, thus it can be hard to justify as a business expense.