Income tax returns for rental property owners can be complex. There are many expenses that property owners can deduct on their tax returns, but you can’t just deduct every payment you make. There are some things you cannot legally claim. What’s more, there have been recent changes to what can be considered deductions for rental property owners under the 2017 Tax Cuts and Jobs Act. Because of these adjustments, you may or may not have to maintain a record for certain expenses, especially those that are no longer allowed. When you know which tax deductions you cannot use as a Fort Lauderdale rental property owner, you can simplify your income tax return preparation.
You need to know the first rule on deducting expenses, that you cannot deduct expenses you didn’t actually pay during the tax year. Case in point, if you took on someone to repaint some of your interior walls in December 2019, but didn’t actually pay for the job until January 2020, you would need to wait and deduct the cost of the service on the 2020 tax return.
- Mortgage payments for your rental properties. This relates to any payment made toward the loan principal. These are not deductible. Your mortgage interests and property taxes, however, remain deductibles.
- Entertainment expenses, even though it’s related to your business. However, business meals are still an allowed deductible, although the limits have changed under the new law.
- Business gifts valued over $25 and given to anyone person during the tax year. Anything that doesn’t go over $25 is fine.
- Club dues, including memberships to gyms, country clubs, or other clubs, even if the intention of making these expenses is for the business.
- Capital improvements, such as updating your doors or laying down a new floor for your rental house. These costs can still be declared, in some way. They just must be depreciated, not deducted.
- Other taxes, including state income taxes and local sales tax. These costs should instead be used 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. This includes anything you spend on lobbying costs or campaign events.
- Home office space. There is an exception, though. And that is if you use that space exclusively for business purposes. That means if you place shared equipment, such as a family computer, in the room, it may mean that your home office deduction is disallowed.
Essentially, income tax deductions are complicated— they are difficult to understand and change over the years. While the best source of advice on tax-related issues and questions is a tax professional, there are things you do, which are related to tax, that can maximize both your time and profit. When you hire Real Property Management Asset Solutions, we will guide you through the labyrinth that is tax deductions. You will never have to wonder whether or not you are keeping track of the right items.
Our team of Fort Lauderdale property managers can provide you with the support you need to ensure that each potential tax deduction is taken while taking away any disallowed items that might lead to problems with the IRS. With our help, you will feel the confidence of being ready for success— both during tax season as well as throughout the year. If you want more information, don’t hesitate to contact us online or call us at 954-889-5627.
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