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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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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.