So you have rental property. Maybe it is a place at the beach, or perhaps you are a landlord owning apartment buildings or single-family homes. You collect rental income for the properties, and probably spend more than you imagined for upkeep, property management and advertising for renters. When tax time comes, if it doesn't seem simple to determine what deductions the IRS allows, then this blog is right up your alley, lane, road, etc.
The IRS advises that rental property owners may deduct interest, taxes, casualty losses (a sudden event that destroys or damages the property), maintenance, utilities that you pay, insurance on the property and depreciation. If your rental expenses exceed your rental income, then you may be entitled to take a loss that offsets other taxable income, thus lowering tax liability.
If you rent a dwelling that also doubles as your residence, then these deductions may be more limited. Specifically, if you, the owner, use the property for the greater of 14 days or 10% of the rental days, then the dwelling is considered a personal dwelling, even if is a beach house where you vacation and not your primary residence. Then you may be limited to deducting rental expenses up to the amount of rental income and therefore you will not have a loss that offsets other taxable income.
Now, here is a good piece of news, if you rent your home for less than 15 days, you may be able to exclude the rental income received as taxable. Of course, that also means that you may not take expenses as a deduction, if the income is not taxable. For example, if the Olympics came to your home town, you may work out a deal to go visit an out of town relative and sign up for a company to rent your home for 14 days to those wanting a place to stay while attending the event.
For more information regarding rental property, review Publication 527 at IRS.gov.
Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.