Tax tips for owners of rental property
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Tax Tips for Owners of Rental Property. 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.

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Tax Tips for Owners of Rental Property

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Tax tips for owners of rental property

Tax Tips for Owners of Rental Property


How is rental income reported

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

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

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

Repairs vs. Improvements

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

  • Repair – keeps your property in good operating condition.

  • Deductible repairs:

    • Fixing broken windows and doors.

    • Repainting inside or out.

    • Fixing gutters.

    • Repairing leaky plumbing.

    • Replastering holes.


Repairs vs improvements1

Repairs vs. Improvements

  • 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

Refinancing Your Rental Property

  • If you refinance, the interest on the mortgage will be traced to the use of the proceeds.

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

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


Selling or exchanging your rental property

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

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

Thank you.


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