Harris, Reed & Seiferth
Did you become a landlord this year by accident? Unforeseen circumstances like job relocation, downsizing, or home inheritance may have put you in this category. Now that tax season is underway, the Internal Revenue Service won't see your "accidental landlord" status as an accident. In fact, if you rent any space for 15 days or more, you'll need to report your rental property and earnings on your federal income statement, according to the IRS.
Here are three tips to help steer you in the right direction as you file your taxes as an "accidental landlord" this year.
1. Gather records of your income and expenses
Record your rental income earnings from the prior year and all cash-related expenditures on the property on IRS 1040 Form Schedule E. Things like property taxes, energy costs, association fees, maintenance and landlord insurance, legal fees (if a lawyer drafted your rental contracts), ad costs to rent the space, and repairs are now deductible because your home is a rental property and not a personal residence. In recent years, there's been an increase on rental property audits, so be sure you have receipts and proper documentation to support your deductions in case you're audited.
2. Exclude security deposits
If you have a hefty deposit that was returned during the taxable year, don't forget to leave that out of your statement.
3. Take depreciation
Tax pros who have real estate experience may be able to help you calculate your annual allowance for wear and tear. Taking depreciation helps offset any drop in property value.
The IRS states that if you meet the following requirements below, your property is eligible for depreciation:
Leave a Reply.
Website by InsuranceSplash