Tax Tips for Homes and Rental Property

by | Jan 21, 2020 | Money

  1. Most expenses incurred when buying a home such as broker’s commission, attorney’s fees, recordings fees, owner titles insurance and transfer taxes are not tax deductible but they are added to the cost basis of the home.Buying a Home
  2. Owning a home
    • You may deduct
      i. Real estate taxes
      ii. Mortgage Interest
      iii. Mortgage Interest Credit
      iv. Casualty or theft loss, subject to 10% AGI limitations
  3. Selling a home
    • The IRS allows up to $500,000 of gain from the sale of principal residence to be tax free if you are married filling jointly, $250,000 is nontaxable for single person.
      i. You must have owned and lived in the property for at least 2 years of the last 5 years.
  4. Having a business in your home
    • Most of the time any expenses that are related to your business can be deducted.
    • Each business is different but here are some ideas that may apply
      i. Franchise fee
      ii. Business Supplies
      iii. Advertising
      iv. Items you give away
      v. Phones bills
      vi. Home Office
      vii. Returned checks/bank fees
      viii. Postage
      ix. Computer
  5. When buying Rental Property
    • Report all rental income, including advance rent received do not include the deposit
    • Expenses paid by tenant should be included in the income and then
      deducted as rental expenses
  6. When Selling Rental Property
    • The gain from the sale of a long term capital assets are subject to
      maximum rate of 15%. The rate for individuals in 10 to 15% income tax
    • Most expenses incurred when buying a home such as broker’s commission, attorney’s fees, recordings fees, owner titles insurance and transfer taxes are not tax deductible but they are added to the cost basis of the home.Buying a Home
  7. Owning a home
    • You may deduct
      i. Real estate taxes
      ii. Mortgage Interest
      iii. Mortgage Interest Credit
      iv. Casualty or theft loss, subject to 10% AGI limitations
  8. Selling a home
    • The IRS allows up to $500,000 of gain from the sale of principal residence to be tax free if you are married filling jointly, $250,000 is nontaxable for single person.
      i. You must have owned and lived in the property for at least 2 years of the last 5 years.
  9. Having a business in your home
    • Most of the time any expenses that are related to your business can be deducted.
    • Each business is different but here are some ideas that may apply
      i. Franchise fee
      ii. Business Supplies
      iii. Advertising
      iv. Items you give away
      v. Phones bills
      vi. Home Office
      vii. Returned checks/bank fees
      viii. Postage
      ix. Computer
  10. When buying Rental Property
    • Report all rental income, including advance rent received do not include the deposit
    • Expenses paid by tenant should be included in the income and then
      deducted as rental expenses
  11. When Selling Rental Property
    • The gain from the sale of a long term capital assets are subject to
      maximum rate of 15%. The rate for individuals in 10 to 15% income tax bracket is 5%. The tax will be eliminated for those in the 10 to 15% income tax bracket beginning in 2008.
      • i. The max capital tax gain will return to 20% and 10%, respectively after 2010. b
    • Or you can purchase another property and defer taxes for the future with a like-kind exchange property which must meet certain requirements. (You must follow Form 8824)