Rental Property Tax Deductions

Rental Property Tax Deductions



Rental Property Tax Deductions
Own residential rental properties? This article discusses how income from those properties impacts your taxes.
What Constitutes Revenue?
Generally,​ rental income is​ defined as​ any revenue you​ receive from the​ occupancy or​ use of​ residential property .​
Rent,​ obviously,​ is​ included in​ that revenue .​
Many owners are surprised to​ learn revenue also includes rent advancements,​ expenses paid by a​ tenant and any security deposits not returned to​ the​ tenant .​
In fact,​ revenue can also include amounts paid to​ cancel a​ lease,​ even if​ you​ had to​ sue the​ defendant to​ get it.
Yeah,​ Yeah,​ But What Can I​ Deduct?
Tax deductions associated with rental properties are strikingly similar to​ those found in​ any business .​
Technically,​ you​ can deduct any expense reasonably necessary to​ manage,​ conserve or​ maintain the​ property .​
Obvious deductions include mortgage payments,​ cleaning expenses,​ insurance premiums,​ service payments such as​ landscape maintenance,​ repairs,​ maintenance,​ etc .​
Overlooked rental property deductions include:
1 .​
Expenses incurred in​ finding tenants,​
2 .​
Commissions paid to​ third parties that arrange for tenants,​
3 .​
Paying your accountant and/or lawyer,​
4 .​
Mileage for driving to​ and from the​ property [I said,​ No more parties!]
5 .​
Depreciation of​ the​ property,​
6 .​
Depreciation of​ items in​ the​ property such as​ washing machines,​ furniture,​ etc.
Imaginary Rent Deduction
A few creative property owners have suggested that they should be able to​ deduct their customary and standard monthly rent if​ the​ property is​ empty .​
The argument goes,​ If the​ property is​ empty,​ I​ am not making revenue and should be able to​ deduct the​ $1,​500 that I​ am missing out on​ .​
At first glance,​ this almost makes sense .​
Sadly,​ it​ doesn’t fly from the​ perspective of​ the​ IRS .​
Since you​ are not receiving revenues,​ your total revenues for the​ year will be reduced by the​ loss rent .​
You can’t double dip by deducting the​ $1,​500 from the​ already reduced yearly revenues .​
The only things you​ can deduct are the​ expenses you​ incur during this period,​ and only for so long as​ you​ are actively trying to​ rent the​ place.
Rental properties are a​ great investment .​
Even more so if​ you​ stay on​ top of​ your taxes.




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