When you own a rental property there are certain guidelines you need to be aware of when tax season arrives. Not knowing what to do can be a headache, and there are a host of things you need to keep in mind when claiming a rental property. Here are several vital bits of information to help you out.
Rental Income is Taxable
All income you receive from owning a rental property is taxable. However, you are able to reduce your tax burden on that income by claiming the expenses you accrue each tax year on a rental property. Both income and expenses concerning your rental property should be reported on the Schedule E form.
Security Deposits
Fortunately, the security deposits you collect for the lease are not considered income as they are refundable when your tenant vacates the rental. However, deposits for the first and last month’s rent do need to be claimed on your taxes because they are advanced rental payments on the property you own.
Any portion of a security deposit you keep as a result of a tenant’s failure to keep the condition of the property in good condition is also taxable and must be claimed.
Deductions
There are plenty of things that you can deduct from your taxes when you claim a rental property. Essentially anything you pay to manage and maintain it is deductible on your taxes. Thus, it’s important to keep your expense receipts.
If you own a rental property, educate yourself so you can save money.
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