Landlord Question: Does a Towing Fee Count as Safe Harbor Expense for Rental Property?

What if the car belonged to the tenant or one of their guests though? Would that change how it's categorized? And if the landlord splits costs with the tenant like this, do they only deduct their portion or the full amount?

If the car belonged to the tenant or their guest, it could potentially change things. In that case, it might be considered more of a tenant responsibility rather than a necessary business expense - though if it was impacting property access, you could still justify it as a necessary expense to maintain property functionality. For split costs with a tenant, you would only deduct the portion you actually paid ($170 in this case). The general rule is you can only deduct expenses you actually incurred. If you charged the tenant through increased rent or as a separate fee later, that would be considered income, and your deduction would be the full amount you paid.

Does it handle other rental property tax questions? I'm trying to figure out if solar panels I installed would be an improvement (depreciated) or if there's a better way to classify them tax-wise. Can taxr.ai help with those bigger expense questions too?

I'm skeptical about these services. How accurate is it really? I've been burned before by tax software that gave me wrong answers for rental property questions and ended up with an audit. Does it cite actual tax codes or just give general advice?

The service handles pretty much all rental property tax questions. They actually have specific modules for energy improvements like solar panels and can tell you about both depreciation schedules and available tax credits which might give you better tax benefits than just depreciation alone. As for accuracy, it's been extremely reliable for me. It cites the specific IRS publications and tax code sections that apply to your situation. That's what impressed me most - it doesn't just categorize things, it explains why with references to the actual tax regulations. Much more thorough than the general tax software I was using before.

How does this service actually work? Does it just call the IRS for you? I'm confused why I'd pay for something like this when I could just call myself.

Yeah right. No way you got through to the IRS in 15 minutes when their average wait time is over 2 hours. I tried calling them 5 times last month about my rental property questions and never got through. This sounds like some kind of scam.

It doesn't just call the IRS - it uses a system that navigates the phone tree, holds your place in line, and then calls you when it's about to connect with an agent. So instead of being stuck on hold for hours, you can go about your day until they're ready for you. I was absolutely skeptical too! I had tried calling the IRS four times before this and never got through after waiting over an hour each time. The difference is their system is constantly redialing and navigating the phone tree using the optimal paths to get through. It's specifically designed to work with the IRS phone system. Was totally worth it for me since I got my question answered the same day instead of waiting weeks.

Yes, we did call the police first! They came out and documented it, put one of those orange stickers on it, and told us we needed to wait 72 hours before having it towed. We followed all the proper channels. The police report actually said the car was reported stolen in another county, but for some reason the towing company still charged us because they said the owner didn't come claim it and they had storage fees.

That's good to hear! Since you followed the proper legal procedures, the expense would definitely qualify as an ordinary and necessary business expense for your rental activity. When you list it on your Schedule E, I recommend noting that proper procedures were followed and that it was necessary to maintain access to the property. While you probably won't need to provide that detail unless audited, it's good documentation to have.

The de minimis safe harbor election does simplify recordkeeping, but you still need to keep receipts! What it really does is allow you to immediately deduct small-cost items (generally under $2,500 per item or invoice) rather than having to capitalize and depreciate them. For example, if you buy a $200 microwave for your rental unit, you can deduct it immediately rather than depreciating it over several years. But you absolutely should keep those receipts - they're your proof if audited. The safe harbor is about how you treat the expenses, not whether you need documentation.