There are various key tax deductions for rental property owners that you should be aware of to lower your taxable income and improve your value. For the most part, tax deductions are claimed costs for the tax year in which they 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.
Nondeductible expenses
On the other hand, non-allowable tax deductions are costs that cannot be deducted to lower taxable income. Personal expenses unrelated to the rental property, such as personal trips, clothing, or groceries, are examples; 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.
Understanding income tax deductions can be challenging due to their complexity. To make the most of your time and earnings, it’s recommended to seek help from a tax professional for any tax-related issues or queries. However, there are certain measures you can adopt to optimize your tax-related affairs. Real Property Management Home Together can assist you in navigating the complex world of tax deductions, ensuring that you keep track of all the necessary items and avoid any confusion.
The St. Augustine property managers on our team can assist you in maximizing your tax deductions while avoiding any disallowed items that could result in issues with the IRS. We can assist you in preparing for tax season and maintaining financial success throughout the year, giving you the confidence you need. To obtain further information, you can either reach out to us through our online platform or call us at 904-417-8988.
We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.
