August 29, 2008, Newsletter Issue #131: Rental Property Tax Deduction

Tip of the Week

For those deriving expenses from rental property, there are a number of tax deductions you may claim on your tax return. All your expenses must directly apply to your rental property. In order to claim your rental property tax payment on your 2006 tax return, you must make the payment during 2006. You report the amount on Schedule E of Form 1040. Also, if you claim depreciation on your rental property, you must file Form 4562.

Real estate taxes. If you pay any real estate taxes on your rental property, you can deduct them from your rental income. Tax return preparation. When you pay anyone to prepare your tax return for your rental property, you can include that expense as part of your rental expenses. Insurance premiums for covering your rental property against perils such as fire and property damage. Salaries and wages paid to any property managers, janitors, maintenance personnel, or other personnel responsible for the day-to-day operations of your rental property. Maintenance expenses Management expenses (if you don’t have an on-site management office) Depreciation expense. For personal property found in your rental property: This includes appliances, carpeting, and furniture. All these items qualify for five-year depreciation. For your rental building: your rental property depreciation rate will vary according to whether it is nonresidential or residential status. Depreciation of both personal and real property is reported on IRS Firm 4562.

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