There are various 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 costs not associated with the rental property, such as clothing, groceries, or vacations, 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.
Income tax deductions are very complicated and as such may be challenging to fully comprehend. There are actions you can take to maximize both your time and earnings, even though a tax professional is the best person to turn to for help with any tax-related issues or problems. When you work with Real Property Management Mid Peninsula, we will help you navigate the confusing world of tax deductions so you never have to worry about keeping track of the right things.
Our team of San Carlos property managers can offer you the assistance you need to make sure that all feasible tax deductions are made while avoiding any items that are not allowed and can cause issues with the IRS. With our assistance, you can be sure that you’re positioning yourself for success not only during tax season but all year long. For additional information, contact us online or give us a call at 650-696-1800.
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