Income tax returns for rental property owners can be complex. Even while there are many expenses that property owners can deduct on their tax returns, there are various others that you cannot legally claim. More than that, under the 2017 Tax Cuts and Jobs Act, deductions for rental property owners have lately been reworked. These reforms mention that you may or may not have to keep an eye on certain expenses, especially those that are not eligible or allowed. Understanding clearly which tax deductions you cannot make as a Queen Creek rental property owner may simplify your income tax return preparation.
The first rule you need to be really aware of with deducting expenses is that you cannot deduct expenses you didn’t actually pay for during the tax year. By way of illustration, if you worked with a person to recondition or repair the plumbing in your rental home in December 2019, yet didn’t actually pay for the job until January 2020, you’d need to wait and deduct the cost of the repairs on the 2020 tax return.
Other non-allowable tax deductions include:
- Mortgage payments for your rental properties. Though mortgage interest and property taxes are both deductibles, whatever payment made toward the loan principal is not.
- Entertainment expenses, even supposing the entertaining is for your business. Business meals are still deductible, however, the limits have changed under the new law.
- Business gifts valued over $25 and given to anyone during the tax year.
- Club dues, including memberships to gyms, country clubs, or other clubs, despite the fact you are using these for business motives.
- Capital improvements, like installing new windows or a new roof on your rental house. These costs must be depreciated, not deducted.
- Other taxes, including state income taxes and local sales tax. These should definitely be included on 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, as well as whatever is expended on lobbying costs or campaign events.
- Home office space, except if it is made use of exclusively for business purposes. As a matter of fact, even placing a family computer in the room could mean that your home office deduction is disallowed.
Conclusively, income tax deductions are difficult and can thus be arduous to really grasp and understand. Despite that, a tax professional is a perfect resource for any tax-related issues and questions, there are things you can perhaps perform to truly maximize both your time and your profit. When you choose to work with Real Property Management East Valley, we will definitely guide you correctly in handling and dealing with the oftentimes unclear terrain of tax deductions in order for you to not keep wondering whether you are keeping track of the right items.
Our team of Queen Creek property managers can provide you with the support you need to ensure that each potential tax deduction is taken while indeed avoiding some disallowed items that can cause problems with the IRS. With our help and assistance, you can definitely be assured you’re getting yourself ready for good results and success both during tax season as well as throughout the year. Contact us online or call us at 480-658-0869 for more valuable information.
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