There are several key tax deductions for rental property owners that you should be aware of to lower your taxable income and enhance your profitability. In general, tax deductions are claimed for the tax year in which the expenses were incurred. It is critical to get the advice of a tax professional or accountant to ensure that you understand the exact rules and requirements for each deduction and that you maximize your benefits within the legal framework.
Alternatively, non-allowable tax deductions are costs that cannot be deducted to lower taxable income. Personal expenses not related to the rental property, such as personal trips, clothing, or groceries, are examples; as well as:
- Monthly mortgage payments. While mortgage interest and property taxes are both deductible, loan principal payments are not.
- Even when the entertainment is connected to your business, entertainment costs are not deductible. Business dinners, on the other hand, are still deductible, though the restrictions have changed under the new rule.
- Business gifts valued over $25 and given to any one person during the tax year are not deductible.
- Club dues, such as subscriptions to gyms, country clubs, or other clubs, are not deductible even if you are entertaining for business purposes.
- Capital improvement costs such as installing new windows or a new roof on your rental house, must be depreciated not deducted.
- Other taxes, including state income taxes and local sales tax. These should be included in 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, including anything spent on lobbying costs or campaign events.
- Home office space unless it is used exclusively for business purposes. Even having a family computer in the room may mean that your home office deduction is disallowed.
In the end, income tax deductions are convoluted, and it may be difficult to fully comprehend all of their implications. Even though a tax professional is the best person to help you with tax problems or questions, there are things you can do to make the most of your time and money. When you hire Real Property Management Integrity, we’ll help you navigate the confusing world of tax benefits, so you’ll never have to wonder if you’re keeping track of the right things.
Our team of Riverside property managers can give you the help you need to make sure you take advantage of every possible tax benefit and stay away from things that the IRS won’t let you write off. With our help, you can be sure that you’re setting yourself up for success during tax time and all year long. For more information, you can email us or call us at (951) 530-1600.
We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.