Income tax returns for rental property owners can be complex. Even though there are many expenses that property owners can deduct on their tax returns, there are others that you cannot legally claim. In addition, under the 2017 Tax Cuts and Jobs Act, deductions for rental property owners have just been amended. These adjustments imply that you might or might not have to keep a record of certain expenses, specifically those that are no longer allowed. Being aware of what sort of tax deductions you cannot take advantage of as a Boston rental property owner can surely simplify your income tax return preparation.
The first rule you ought to perceive regarding deducting expenses is that you cannot deduct expenses you didn’t actually pay during the tax year. As an example, if you employed one person to fix the plumbing in your rental home in December 2019, but you didn’t actually pay for the job until January 2020, you have 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. Even though mortgage interest and property taxes are both deductible, any payment made toward the loan principal is not.
- Entertainment expenses, even if the expense of hospitality and entertaining concerns your business. However, business meals are still deductible, but 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, even in cases when you are entertaining for business reasons.
- Capital improvements, for instance, putting up 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 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, anything given for lobbying costs or campaign events is not deductible.
- Home office space, except if it is utilized exclusively for business purposes. As a matter of fact, even having a family computer in the room can mean that your home office deduction is not allowed.
Finally, income tax deductions are hard and burdensome to figure out. Although a tax professional is the ideal source of counsel on tax-related issues and questions, there is something you can carry out to optimize both your time and your returns. Whenever you employ Real Property Management Boston, we will help you through the sometimes complicated and confusing terrain of tax deductions so that you, by no means, have to ponder whether you are keeping track of the right items.
Our team of Boston property managers can provide you with the support you need to ensure that each potential tax deduction is taken as well as dodging each and every disallowed item that may set off problems with the IRS. With our counsel, you can surely think positive and feel confident you’re building yourself up for triumph and success both during tax season as well as throughout the year. Contact us online or call us at 617-522-0099 for more helpful information.
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