There are several important tax deductions for rental property owners that you should be aware of in order to reduce your taxable income and increase your profitability. Tax deductions are often claimed for the tax year in which the expenses were incurred. It is vital to get the counsel of a tax professional or accountant to ensure that you grasp the particular rules and conditions for each deduction and that you maximize your benefits while remaining within the legal framework.
Nondeductible expenses
Alternatively, non-allowable tax deductions are costs that cannot be deducted to lower taxable income. Personal expenses unrelated 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.
Ultimately, income tax deductions are complicated and may be difficult to fully comprehend. While a tax professional is the best resource for any tax-related issues or inquiries, there are actions you can take to maximize both your time and revenue. When you choose Real Property Management Affiliates, we will walk you through the complicated world of tax deductions, so you never have to wonder if you’re keeping track of the right things.
Our Spring Branch property managers can give you with the assistance you require to ensure that every potential tax deduction is taken while avoiding any banned items that could lead to IRS difficulties. With our assistance, you can be confident that you’re putting yourself up for success both during tax season and throughout the year. For further information, please contact us online or call 713-429-0411.
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.
