Income tax returns for rental property owners can be complex. Despite that there are many expenses that property owners can deduct on their tax returns, there are several others that you cannot legally claim. Further, under the 2017 Tax Cuts and Jobs Act, deductions for rental property owners have been freshly updated. These updates indicate that you may or may not keep up with certain expenses, in particular, those that are not allowed anymore. Discovering and learning about which certain tax deductions you cannot use as a Houston rental property owner might simplify your income tax return preparation.
The first rule you need to find out concerning deducting expenses is that you cannot deduct expenses you didn’t actually pay for during the tax year. For instance, if you enlisted a certain person to do repairs with the plumbing in your rental home in December 2019, but you didn’t actually pay for the job until January 2020, you would definitely 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 deductibles, every payment made toward the loan principal is not.
- Entertainment expenses, even if the entertaining is with regards to your business. Although business meals are still deductible, 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 if you are entertaining for business reasons.
- Capital improvements, in particular, fixing 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 shall 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, also all and anything used on lobbying costs or campaign events.
- Home office space, providing it is utilized exclusively for business purposes. Additionally keeping a family computer in the room may probably mean that your home office deduction is not allowed.
On that note, income tax deductions are stressful to understand and could be hard to understand. A tax professional is an appropriate resource to ask help from with every tax-related issues and questions, there are things you can probably do yourself to truly maximize both your time and your income. If you enlist Real Property Management Avitus, we will help you manage the oftentimes vague terrain of tax deductions so you definitely do not have question yourself whether you are keeping track of the right items.
Our team of Houston property managers can provide you with the support you need to ensure that each potential tax deduction is taken while still keeping away from whatever disallowed items that might possibly give rise to problems with the IRS. With our recommendation, you may be assured you’re gearing yourself up for success and attainment both during tax season as well as throughout the year. Contact us online or call us at 281-570-6357 for more useful information.
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