Tax Tips for Owners of Rental Property | David Wish

Tax Tips for Owners of Rental Property David E Wish

How is Rental Income Reported?

Usually on Schedule E.

A security deposit is not considered income at the time it is received.

Tenant cancellation fees are taxable.

Can I Deduct a Loss?

• Rental activity is considered a passive activity.

• Losses from the rental are generally allowed

provided you rent your property for a fair rental price and actively participate in the rental activity.

What Expenses Are Deductible?

• Mortgage Interest

• Property Taxes

• Insurance

• Travel Expenses

• Legal or Professional Fees

• Advertising

• Utilities

• Cleaning and Maintenance Fees

• Supplies

Repairs vs. Improvements

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Improvement – adds to the value or life of the property.

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Repair – keeps your property in good operating condition.

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Deductible repairs:

– Fixing broken windows and doors.

– Repainting inside or out.

– Fixing gutters.

– Repairing leaky plumbing.

– Replastering holes.

Repairs vs. Improvements

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Examples of improvements:

– Additions

– Landscaping

– Roof, door, or window replacement

– Security system

– Electrical wiring

– Insulation

– Siding

– Heating and cooling systems

– Carpeting

– Appliances

Refinancing Your Rental Property

If you re nance, the interest on the mortgage will be traced to the use of the proceeds.

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Unless you use the proceeds for improving the rental property, or for purchasing another rental property, you may be losing a deduction.

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If you use the proceeds to purchase investment property, you will have investment interest expense.

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Selling or Exchanging Your Rental Property

• • •

The sale is considered a sale of a business asset.

Keep accurate records of the improvements made.

To avoid paying tax on the gain, consider exchanging the property for another rental property.

Tax Saving Opportunities

Rental property can be a great way to increase your bank account. Make sure you are taking advantage of the tax saving opportunities that are available to you.

As a tax professional, I’m available to help you do just that.

Thank you.