An expense is a cost incurred by the business to generate revenue. Essentially, it involves the total costs of doing business, and it is the addition of all the activities that take place in a company, which will eventually and hopefully generate income. Given that the Corneasha business organization deals with real estate, it is likely to deduct the following expenses in the event of making its revenues. Firstly, Corneasha pays the insurance company for its properties, which amounts to $75 per month. It is appropriate for the firm to deduct an amount equivalent to 15 to 20 percent more than the homeowners every month (Goodman et al., 2019). Secondly, rentals necessitate good maintenance, and therefore Corneasha incurs costs to ensure that they are always in good condition.
Whether frequent or infrequent, property maintenance is often deductible maintenance expenses. Such expenditures may include pest control, flushing sewages, gutters cleaning, and even the deep cleaning between the rental turnovers (Goodman et al., 2019). In addition, it is right to figure out that the properties owned by Corneasha need someone to manage for them to operate efficiently. Therefore, Corneasha should deduct such an expense as it is treated as an administrative cost. In case of a legal eviction, there is a need for the costs associated with the removal, such as the court and the legal fees, to be subtracted. Finally, the fee paid by the tenants in Corneasha’s property, which is often known as an expense paid by the tenant, is counted as the rental income since the owner could make the payment otherwise (Wang et al., 2018). For instance, occupants may cover their own HOA dues, which could be deducted from their monthly income.
Thus, the above expenses have to be deductible, including water and sewage. The firm should as well remove the costs that arise from its employees. Such charges include wages, social security contributions, health insurance coverage, and any other existing benefits. Thus, in Corneasha’s case, the total cash expenses to be deductible are as follows: Rental expenditures = Principal expenses (Aggregate) + Insurance expenses (Aggregate) + Repairs expenses (Aggregate) (Wang et al., 2018). Thus, (295 dollars x 4) + (75 dollars x 4) + (150 dollars x 4) = 2080 dollars every month. Therefore, Corneasha ought to subtract 2080 dollars every month as rental expenditures.
Goodman, L., Lim, K., Sacerdote, B., & Whitten, A. (2019). Simulating the 199A Deduction for Pass-through Owners. Office of Tax Analysis Working Paper, 118.
Wang, H., Yu, F., & Zhou, Y. (2018). Property investment and rental rate under housing price uncertainty: A real options approach. Real Estate Economics, 48(2), 633-665. Web.