Income tax returns for rental property owners can be complex. Conceding that there are many expenses that property owners can deduct on their tax returns, there are also many others that you cannot legally claim. Also, under the 2017 Tax Cuts and Jobs Act, deductions for rental property owners have just been revised. These revisions state that you might or might not be required to keep up to date with certain expenses, specifically those that are not authorized. Considering which tax deductions you cannot utilize as a Richardson rental property owner can help simplify your income tax return preparation.
The first rule you should realise when it comes to deducting expenses is that you cannot deduct expenses you didn’t actually pay for during the tax year. For instance, if you contracted somebody to address and repair the plumbing in your rental home in December 2019 but didn’t actually pay for the job until January 2020, you would definitely have to wait and deduct the cost of the repairs on the 2020 tax return.
Other non-allowable tax deductions include:
- Mortgage payments for your rental properties. Even if mortgage interest and property taxes are both deductibles, each payment made toward the loan principal is not.
- Entertainment expenses, even if the entertaining is related to your business. Though business meals are still deductible, nevertheless, the limits have changed under the new law.
- Business gifts valued over $25 and given to anyone person during the tax year.
- Club dues, including memberships to gyms, country clubs, or other clubs, even when you are using these for business reasons.
- Capital improvements, for example, placing new windows or a new roof on your rental house. These costs must be depreciated, not deducted.
- Other taxes, including state income taxes and local sales tax. These would have been included on your personal income tax return.
- Fines and penalties, such as those levied by the IRS for underpayment of a prior year’s taxes and late payment fines.
- Political contributions, and also various things paid for in regards to lobbying costs or campaign events.
- Home office space, only if it is used exclusively for business purposes. Even putting a family computer in the room might mean that your home office deduction is disallowed.
To conclude, income tax deductions are laborious and are difficult to learn about and understand. Though a tax professional is a really good source of direction and guidance on tax-related issues and questions, there are aspects you might have to work on to absolutely maximize both your time and your earnings. When you employ and contract Real Property Management One Source, we will support you as you steer and navigate the sometimes confusing terrain of tax deductions so that you would never question whether you are keeping track of the right items.
Our team of Richardson property managers can provide you with the support you need to ensure that each potential tax deduction is taken yet evading any disallowed items that may perhaps create problems with the IRS. With our direction, you can truly stay confident and sure you’re preparing yourself for successful outcomes both during tax season as well as throughout the year. Contact us online or call us at 214-960-1612 for more information.
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