We know that taxes can be complicated, and being a rental property owner may present a whole new set of processes and questions. At Taxes Made EZ, we’ve got you covered. We understand that everyone’s situation is unique, and we want to make your tax filing process as simple, streamlined, and beneficial as possible. Below is some information and a few tips for rental property owners.

First and foremost, all rental income must be reported on your tax return. This includes not just rent payments, but also advance rent, non-refundable deposits, and expenses the tenant pays. The only exception is for short-term rentals. You do not need to report this income if you rent your property for fewer than 15 days a year. Rental income and expenses should be reported on Schedule E (Form 1040), so you should familiarize yourself with this form before filing. You should also be aware of your state and local tax obligations, which can vary.

As a rental property owner, you can deduct various expenses to reduce your taxable income. These include local property taxes, interest paid on loans to acquire or improve rental properties, and operating expenses such as maintenance, utilities, and insurance. You can also deduct depreciation on the property, not including the land, over 27.5 years for residential properties. Fees for property management, legal advice, and tax preparation related to the property can also be deducted.

The IRS considers rental activities passive, meaning losses from these properties generally cannot be deducted. However, there are a few exceptions to be aware of. One is special allowances for rental real estate. If you actively participate in managing the property, you may deduct up to $25,000 of losses against non-passive income. Also, if you qualify as a real estate professional, rental activity is not considered passive, and losses can be deducted against other income.

There are several unique tax strategies for rental property owners that can be especially useful when filing. A 1031 exchange allows you to defer capital gains taxes when you sell a rental property, provided the proceeds are invested in another similar property. If you manage your rental properties from a home office, you can deduct related expenses. Cost segregation is another strategy to consider, as it can accelerate depreciation deductions for certain components of your property, including appliances and landscaping.

Taxes Made EZ is here to answer all your tax-related questions and use our expert guidance to make the process as simple and stress-free as possible.

Call us today at (856) 232-0958 or schedule a call today.