Income tax returns for rental property owners can be complex. Though there are many expenses that property owners can deduct on their tax returns, there are others that you cannot legally claim. Furthermore, under the 2017 Tax Cuts and Jobs Act, deductions for rental property owners have been newly modified. These modifications point out that you may or may not have to keep an eye on certain expenses, specifically those that are not allowed. Finding out what tax deductions you cannot apply as a Garden Oaks rental property owner can probably simplify your income tax return preparation.
The first rule you would have to be aware of relating to deducting expenses is that you cannot deduct expenses you didn’t actually pay during the tax year. As an illustration, if you engaged an individual to correct or repair the plumbing in your rental home in December 2019, however, didn’t actually pay for the job until January 2020, you would certainly need 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. Despite that mortgage interest and property taxes are both deductibles, the payments made toward the loan principal are not.
- Entertainment expenses, even if entertaining or the provision of hospitality is in regards to your business. Nevertheless, business meals are still deductible, however, the limits have changed under the new law.
- Business gifts valued over $25 and given to any person during the tax year.
- Club dues, including memberships to gyms, country clubs, or other clubs, even supposing you are playing host for business reasons.
- Capital improvements, like setting up 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 can 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, as well as those used on lobbying costs or campaign events.
- Home office space, except if it is employed exclusively for business purposes. Even keeping a family computer in the room may possibly mean that your home office deduction is disallowed.
Lastly, income tax deductions are arduous and might be stressful to grasp. Even though a tax professional is an excellent resource to help with some tax-related issues and questions, there are things you can possibly bring about to certainly maximize both your time and your income. As soon as you engage Real Property Management Heritage, we will help to guide you along the sometimes dubious terrain of tax deductions in order to ensure you absolutely never have to doubt if you are keeping track of the right items.
Our team of Garden Oaks property managers can provide you with the support you need to ensure that each potential tax deduction is taken as well as avoiding every disallowed item that could bring on problems with the IRS. With our advice, you can be secure that you’re preparing yourself for total success both during tax season as well as throughout the year. Contact us online or call us at 832-449-5263 for more needed information.
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