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Can I Claim It? Important Tax Deductions Rigby Rental Property Owners Should Know About

Papers Sitting on a Desk with a Sticky Note Labeled Tax DeductionIncome tax returns for rental property owners can be complex. There are many expenses that property owners can deduct on their tax returns, but it doesn’t mean you can deduct every cost you incur. There are some expenses that you cannot legally claim. What’s more, under the 2017 Tax Cuts and Jobs Act, deductions for rental property owners have been updated. These developments mean that you may or may no longer need to keep a tally on certain expenses, especially those that are no longer allowed. When you know which tax deductions you cannot use as a Rigby rental property owner, you can simplify your income tax return preparation.

The first rule on deducting expenses is that you cannot deduct expenses you didn’t actually pay during the tax year. This is something you ought to know. For instance, if you employed someone to fix the plumbing in your rental home 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 repairs on the 2020 tax return.

Other non-allowable tax deductions include:

  1. Mortgage payments for your rental properties. This means any payment you make toward the loan principal. These aren’t deductible. However, mortgage interest and property taxes are both still deductibles.
  2. Entertainment expenses, even though it’s related to your business. However, you may still deduct business meals, although the limits have changed under the new law.
  3. Business gifts valued over $25 and given to anyone person during the tax year. Gifts that don’t go over $25 are all right.
  4. Club dues, including memberships to gyms, country clubs, or other clubs, even if these memberships are used for business purposes.
  5. 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.
  6. Other taxes, including state income taxes and local sales tax. You should include these on your personal income tax return instead.
  7. Fines and penalties, such as those levied by the IRS for underpayment of a prior year’s taxes and late payment fines.
  8. Political contributions. Any expense on lobbying costs or campaign events is not allowed.
  9. 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.

Ultimately, income tax deductions are really complicated. They are difficult to understand and are subject to change over time. While tax-related issues and questions are best given to tax professionals, there are things related to tax that you can do to maximize your time and profit. When you get Real Property Management Southeast Idaho to work with you, we will assist you through the disorienting haze of tax deductions so that you will never have to be unclear and unsure of whether or not you’re keeping track of the right items.

Our team of Rigby property managers can provide you with the support you need to ensure that each potential tax deduction is taken while not including any disallowed items that might lead to problems with the IRS. With our assistance, you will be confident and ready for success both during tax season as well as throughout the year. To know more about what we can do for you, please contact us online or give us a call at 208-522-2400.

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