Taxes and Home Rentals - Part 2

In the event that you own property and plan to use it exclusively to gain rental income, there are certain Federal Tax responsibilities that must be met. Understanding this in the beginning can allow for a relatively smooth time as a property owner in collecting rent, and easy preparation for Tax Returns or even an audit.
All income must be reported, this includes rental payments, security deposits (if they will not be returned), or any charges for a broken lease agreement. This can also include expenses that are paid by the tenant, especially if the rental agreement does not obligate them to pay for those expenses. All costs related to ordinary and necessary management, conservation, and maintenance of a property is tax deductible. This would include the costs of supplies, repairs, and materials. Mortgage interest and property tax can be deducted as well. The costs of improvements are never included as a deductible expense.
         These are all detailed transactions, and keeping records of them will make the Tax Return process much simpler. Having good documentation will provide evidence for any claims made and can make an audit run little more smoothly, since providing the records asked for always speeds up the process. For detailed help in keeping track of expenses, knowledge of forms to use, and insight into the state of your property investment Anthony Sykes & Co can provide guidance.

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