You can reduce your taxable income and increase your profits by taking advantage of a number of important tax deductions available to landlords. Deductions are typically claimed in the same tax year that the associated expenses were incurred. In order to maximize your tax benefits while staying within the letter of the law, it is essential that you seek the guidance of a tax professional or accountant.
Nondeductible expenses
Alternatively, 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.
Income tax deductions, in the end, might be complicated and hard to grasp. While a tax expert is your best bet for advice on any issues or queries with your taxes, there are things you can do to make the most of your time and money. If you hire Real Property Management Absolute, we’ll make sure you’re keeping track of everything that can be deducted from your taxes, eliminating any guesswork.
Our Manchester-based property management staff is here to help you claim every allowable tax deduction while avoiding any issues with the Internal Revenue Service. With our assistance, you may prepare yourself for success during tax time and all year long. If you have any questions, please call us at 603.242.2727 or contact us online.
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