By topic: Rental properties

IRS Arrives with Tax Assessor’s Allocation to Land and Building

On your rental properties, you need proof of your cost allocation to land and depreciable buildings. If you have no proof of that allocation, the IRS has started using the Internet to grab the tax assessor’s allocation and use that against your depreciation deductions.

IRS Defines Real Property for Section 1031 Like-Kind Exchanges

Section 1031 exchanges are a great way to acquire new property without paying tax on the gains from selling old property. But the rules have changed. The Tax Cuts and Jobs Act limits so-called exchanges (they are actually sales and purchases) to real property. Personal property is now boot. New IRS regulations define real property broadly for Section 1031 purposes and allow a certain amount of personal property to be included in an exchange. They also make it clear that the real property owners can use cost segregation and still benefit from Section 1031 exchanges.

How Renovating a Historic Building Can Put Money in Your Pocket

The federal Rehabilitation Tax Credit provides a 20 percent tax credit for owners or leaseholders to renovate certified historic buildings. Most states offer similar tax credits, with different percentages, providing additional cost savings. But this is tax law, and as you would expect, there are some tricky rules that you need to follow to qualify for these huge subsidies.

Q&A: How Do I Get My Rental Losses onto Schedule C?

Does creation of a single-member limited liability company move rental losses to Form 1040, Schedule C? Answer: no. Changing the type of entity does not move the rental to Schedule C, but changing the attributes of the rental can qualify the rental for Schedule C.

QBI Update: Impact of Negative QBI and Previously Suspended Losses

As you likely know, the Section 199A 20 percent QBI deduction is a delightful tax benefit. But it is not without its nuances. For example, if you have multiple business and/or rental properties, you need to consider the aggregation issues—both forced by the law and optionally incurred by you.

Government to Landlords: Drop Dead!

An unprecedented nationwide moratorium on evictions for non-payment of rent is in place through the end of 2020 (and for even longer in some states). But landlords may still be able to evict some problem tenants, and even sue for overdue rent. Other options include entering into payment plans with struggling tenants, seeking forbearance from lenders, and obtaining low-interest SBA loans. That’s the practical problem—and then you have the tax issues. Rental losses may or may not be deductible against non-rental income, subject to complex passive loss rules, as we explain here.

Does Renting My Home for Two Months Kill the $500,000 Exclusion?

Learn how renting out your home while you take a two-month vacation interacts with your ability to use the $500,000 home-sale exclusion ($250,000 if single). Remember, you have to use the home as a home for two of the five years before sale to qualify for the home-sale exclusion.

Create Deductions: Use Your Vacation Home for Business Lodging

The properly used business vacation home or condo does not run up against the oppressive vacation-home, passive-loss, or entertainment-facility rules. That’s a huge plus. And with the COVID-19 pandemic, use of the vacation home for business lodging makes good sense.

CARES Act Fixes TCJA Glitch on QIP, Requires Action

Congress made an error in the Tax Cuts and Jobs Act that limited your ability to fully expense your qualified improvement property. The CARES Act fixed the issue retroactively to tax year 2018. If you have such property in your prior filed 2018 or 2019 tax returns, you likely have no choice but to correct those returns. But the bright side is that the corrected law gives you options that enable you to pick the best tax result.

COVID-19: Important Tax Breaks from the CARES Act

Congress just passed the CARES Act in response to the COVID-19 pandemic. In it, there are a lot of important tax benefits for you and your business. We’ll tell you about a collection of important ones you need to know.

Unlock Tax Deductions with a Rental Property Home Office

Home-office deductions aren’t just for Schedule C businesses. You can have a rental property home office and deduct those expenses on a Schedule E. Besides the usual tax benefits of a home-office deduction, you will gain time that can qualify you as having tax code–defined real estate professional status, and thus unlock 100 percent of your current-year rental losses for immediate deduction against all income.

Buy the Building. Rent It to Your Business. Avoid Passive Losses.

If you plan to buy a building that you are going to rent to your business, you need to know the tax rules to obtain the best benefits. Here, you will learn about an income tax election that you can make on your IRS Form 1040 to avoid the passive loss rules that deny current-year rental losses.

Will the Newly Released Section 199A Rental Safe Harbor Work for You?

In January, an IRS Notice gave you a Section 199A safe-harbor option for your rental properties, possibly making it easier for you to qualify for this new tax deduction. Now, the IRS has made a number of changes to its original notice and finalized the safe harbor in a Revenue Procedure. We’ll tell you all you need to know about the final version. Then you can decide if you want to use the safe harbor or find other ways to qualify your rentals for the Section 199A deduction.

Converting Your Residence into a Rental Property: Tax Issues

The simple maneuver of converting your personal residence to a rental property brings with it myriad tax rules, mostly good when you know how they work. For example, your rental net income can create the Section 199A deduction if the rental rises to the level of a trade or business (most do).

Capture Your 199A Tax Deduction

The Tax Cuts and Jobs Act brought sweeping changes to the tax laws―some good and some bad. But the one change that can potentially provide you the biggest tax benefit is the Section 199A deduction.

New Tool for Your Use: 2019 Section 199A Calculator

When planning your Section 199A tax deduction, avoid difficult calculations and save time by using the new 2019 Section 199A Deduction Calculator. Inside this article, you find the rules you need to know to find your QBI, Section 199A wages, and Section 199A property that can figure into your Section 199A deduction possibilities.

Personal Use of Your Rental Triggers Ugly Vacation Home Rules

When you have both personal and rental use of a dwelling, you trigger some tricky tax code rules you need to know. With both personal and rental use, you create the possibility of tax-free rent, rental property deductions, and additional personal residence deductions.

Beware: IRS Error in Rental Property Deduction Publication

The IRS publication on rental properties contains an error. It states that you may not deduct mortgage insurance on your rental property. That’s wrong, as we explain in this article.

When Renting to a C Corporation Creates QBI

What rules apply for purposes of the new 20 percent deduction under Section 199A when you rent an office or other building to your personally owned C corporation?

Secrets to Pocketing Cash by Renting a Bedroom in Your Home

If you want to rent one, two, or 20 bedrooms in your home, you need to know five sections of the tax law to obtain your rightful tax benefits. This is an area where tax knowledge is power. Without the knowledge, you could create a very unsatisfactory tax result.

Use a Single-Member LLC as a Tax-Smart Real Estate Ownership Vehicle

You find much beauty and little beast in using a single-member LLC for your real estate ownership. Of course, the big beauty is corporate-style liability protection without tax complexity, as you see in this article.

Know These Tax Rules If Your Average Rental Is Seven Days or Less

If you own a condominium, cottage, cabin, lake or beach home, ski lodge, or similar property that you rent for an “average” rental period of seven days or less for the year, you have a property with unique tax attributes. For example, it’s not a rental property under the tax law, but it does produce either taxable income or a tax-deductible loss.

Tax-Saving Double Play: Combine Home Sale with the 1031 Exchange

You don’t often get the opportunity to even consider making a tax-saving double play. But your personal residence combined with a desire for a rental property can provide just such an opportunity, as you learn in this article.

Q&A: Making Rental Property Work with the Section 199A Deduction

You’ll find much to love about the new Section 199A tax deduction when you qualify for it. One area where you can find mass confusion is with rental properties. To avoid much of this rental property muddle, download the special report you find in this article.

How to Handle Multiple Rental Activities and the 199A Deduction

Applying the Section 199A deduction to your rental activity isn’t easy. If you’ve got multiple rental activities, it’s more complex with additional complications. Don’t worry, though—we’ll go step by step through the considerations so that you know you’ve got all your bases covered.

Good News: Most Rentals Likely Qualify as Section 199A Businesses

The IRS safe harbor that you find in Notice 2019-7 may well represent a red herring for you because your rental properties likely already qualify as a business for the Section 199A deduction. If so, you can avoid the complexities of the safe harbor.

Q&A: Improvement Property Update

Congress wanted qualified improvement property to have tax-favored status under tax reform. But Congress made an error in writing the Tax Cuts and Jobs Act and made improvement property treatment worse than before. Did Congress fix its goof?

Q&A: Is a Triple Net Lease to a C Corporation QBI?

You operate your professional practice as a C corporation. Your spouse rents your office to your C corporation on a triple net lease. Does your spouse qualify for the Section 199A deduction on the rental income, and if not, what can be done about it?

IRS Issues Final Section 199A Regulations and Defines QBI

Your ownership of a pass-through trade or business can generate a tax deduction of up to 20 percent of your qualified business income (QBI). The C corporation does not generate this deduction, but the proprietorship, partnership, S corporation, and certain trusts, estates, and rental properties do. In this article, you learn how to find your QBI.

IRS Clarifies Net Capital Gains in Final 199A Regulations

New tax code Section 199A can give you a tax deduction of up to 20 percent of your taxable income reduced by net capital gains. Last August, the IRS issued Section 199A proposed regulations that gave you some guidance on what net capital gains are. And now the new final regulations give you clarifying guidance on what the IRS deems are net capital gains for purposes of Section 199A.

IRS Creates a New “Safe Harbor” for Section 199A Rental Properties

The Section 199A 20 percent tax deduction is a possible gift from lawmakers. Literally, you don’t earn this deduction; it’s simply there for you if you qualify. Under the trade or business rule, your rental property profits can create the deduction. And now, under an alternative rule, you can use the newly created IRS safe harbor to make your rentals qualify for the deduction.

For 199A Tax Deductions, Must Landlords Give 1099s to Vendors?

Get ready. You may be about to experience another encounter with the law of unintended consequences. The Tax Cuts and Jobs Act gives you a possible 20 percent tax deduction on your rental property income. But that’s only if your rental property is a trade or business, and that comes with its own burdens.

New Downloadable Section 199A Tax Deduction Topic Guide

What do you need to know about the new 20 percent tax deduction that’s available to you if you have ownership in a pass-through business such as a proprietorship, a partnership, an S corporation, a trust, an estate, and certain rental properties? Find the information you are looking for with this downloadable PDF.

Defining “Real Estate Investor” and “Real Estate Dealer”

The first good news is that you can be both real estate investor and real estate dealer with respect to your real estate portfolio. The next good news is that you are in control, and by knowing just a few rules about dealer and investor classifications, you can do much to increase your net worth.

How the TCJA Tax Reforms Hammer Personal Casualty Loss Deductions

The Tax Cuts and Jobs Act makes claiming a tax deduction for a personal casualty loss more difficult. And when you do qualify to deduct a personal casualty loss, you face a number of rules that add to your misery by making the loss deduction difficult. In select circumstances, you can use a safe harbor, which makes things a little easier.

Q&A: Do Triple-Net Leases Qualify for a 199A Deduction?

The proposed Section 199A regulations give us guidance on whether rental activities qualify for the 20 percent deduction. If you use triple-net leases for your rental properties, you may wonder if you’ll get your deduction. We’ll discuss what we know and whether triple-net leases qualify for the deduction.

Audit-Proof Your Time Spent on Rental Properties

To deduct your passive losses as a tax law–defined real estate professional, you or your spouse, or both, must prove time spent. Since you need proof of time spent to deduct rental property losses, use the tactics in this article to keep track of your time and also increase your overall profits on the rentals.

New IRS Regs: Does Your Rental Qualify for a 199A Deduction?

Section 199A gives you up to a 20 percent tax deduction for your pass-through business income. Do your rental activities count? We’ll go over what the proposed Section 199A regulations say about your rental activities and whether those activities qualify you as an individual for this possible 20 percent tax deduction.

How Cost Segregation Can Turn Your Rental into a Cash Cow

Cost segregation has always been a valuable strategy in your tax strategy toolkit. And now, thanks to tax reform’s recent changes to bonus depreciation, cost segregation is even better. We’ll show you the value of a cost segregation study post–tax reform, strategies you can use that involve cost segregation, and potential problems to avoid.

Q&A: Qualified Improvement Property Snafu?

Congress created the qualified improvement property category in the Tax Cuts and Jobs Act with the idea that you could fully expense such qualified property with bonus depreciation. But Congress made an error in the law, and now you can’t use bonus depreciation for qualified improvement property. Don’t worry—we’ll explain how you might be able to fully expense it anyway.

Does Non-Home Use of Your Home Damage Your $250,000 Exclusion?

The days when you could convert your rental property or vacation home to a principal residence and then use the full $250,000/$500,000 home-sale exclusion to avoid taxes are gone. Today’s law requires an allocation that keeps part of your rental as a rental so you have to pay taxes on that rental part.

Don’t Let the Cliff Kill Your New Section 199A Tax Deduction

How will you fare with the new Section 199A tax deduction? This article can help you make sure that you realize the 20 percent deduction. It’s simply a tax gift if you qualify. And you can do some planning to help you qualify, but you may have to start now.

Reduce Self-Employment Taxes by Renting from Your Spouse

If you operate your business as a sole proprietorship, the government takes a big chunk of your profits in the form of self-employment taxes. But there’s good news. With the help of your spouse, you can reduce your self-employment tax bill by using a simple rental strategy.

Hiring Your Children to Work on Your Rental Properties

If you own rental property in your name or in the name of a single-member LLC, you report your rental property income and expenses on Schedule E of your IRS Form 1040. But what happens when you have an expense for which the IRS has not created a line item on the form? No problem—simply insert it as we explain in this article.

Four Ways to Deduct Your Legal Fees after Tax Reform

Tax reform made it more difficult for you to deduct your legal fees. But don’t worry: the tax law still allows for a full deduction of your legal fees in certain circumstances. We’ll review four ways you can continue to deduct your legal fees after tax reform.

Tax Reform Does Much to Help Your Rental Real Estate

The recent tax reform, known as the Tax Cuts and Jobs Act (TCJA), added some good benefits to your real estate rentals, both commercial rentals and residential rentals. Notably, your qualified business income from your real estate rentals creates a possible 20 percent tax deduction with no effort on your part. And if you want less taxable income, the TCJA gives you enhanced bonus depreciation and new avenues for Section 179 expensing.

New Section 199A Tax Reform Calculator for Your Use

The new 20 percent tax deduction under new tax code Section 199A has many nuances based on your type of business, taxable income, qualified business income, wages, and depreciable property. Here you have an easy-to-use Section 199A calculator that takes away the pains of manually computing your possible benefits.

Tax Reform: Wow, New 20 Percent Deduction for Business Income

The new 2018 Section 199A tax deduction that you can claim on your IRS Form 1040 is a big deal. There are many rules (all new, of course), but your odds as a business owner of benefiting from this new deduction are excellent.

Tax Reform: Will Section 199A Phase In or Phase Out Your 20 Percent Deduction?

If your pass-through business is an in-favor business and it qualifies for tax reform’s new 20 percent tax deduction on qualified business income, you benefit at all times, including being above, below, or in the expanded wage and property phase-in range. On the other hand, if your business is a specified service trade or business, it is in the out-of-favor group and you benefit only when you are in or below the phaseout range.

Cashing Out Real Estate Profits without Section 1031

Section 1031 exchanges are perfect when you are going to stay in the real estate rental or investment business. When it’s time to cash out, you need to look at different strategies that help you avoid taxes and give you cash to spend (liquidity).

Six Ways to Beat the Passive-Loss Rental Property Rules

You want to deduct your business, rental, and non-rental losses when possible, because those deductions put cash in your pocket. The sooner you get the cash, the faster you can put that cash to work for you building your net worth. This article helps you realize those losses sooner.

Easily Fixing Depreciation Errors Can Save Thousands in Taxes

Depreciation is a valuable tax deduction but is often missed or mistakenly computed. If you missed depreciation or did it incorrectly, you can fix it in the current year and get some possible major tax benefits for doing so. In fact, the need for a correction can create planning opportunities for you.

Avoid Partnership Tax Filing with Two Little-Known Elections

Having a business or activity operated as a partnership means extra tax return filings and compliance headaches. But you might qualify to elect out of partnership treatment. Here, we discuss the two elections available, when you qualify or not, and the impact of making an escape election.

Passive Losses Don’t Destroy Your Tax-Favored Capital Gains

Suspended passive activity losses come about when the losses from all passive activities for the taxable year exceed the aggregate income from all passive activities for such year. These are losses above or beyond what you can deduct under the $25,000 offset for rental activities. When you sell your entire interest in a passive activity at a gain, you have a taxable gain and a jailbreak of those losses and maybe more.

Q&A: Is a Real Estate Agent a Broker for Deducting Rental Losses?

Before you can deduct rental property losses, you must first qualify as a real estate professional (a person in the real property trades or businesses). The real estate broker is recognized in the tax code as a person who is in the real property trade or business for purposes of the passive loss rules. The real estate agent is not recognized in the law.

Self-Rental Trap Still Costing Business Owners Tax Dollars

Business owners continue to get caught in the complex rules of the self-rental trap. A recent case taken from the Tax Court to the Fifth Circuit shows how business owners can get into tax trouble with self-rentals. But with proper tax planning and possible use of special rules called “grouping,” you can minimize and even eliminate the tax cost of the self-rental trap.

How to Help Your Adult Child Buy a Home—the Tax-Friendly Way

Your adult child asks a big favor—help in buying his or her first home. If you are lucky enough to be able to help, you want to understand and avoid the tax pitfalls. In this article, you find five possible solutions to help your child while avoiding the tax pitfalls.

Q&A: Would Rental Real Estate Give Me Tax Shelter?

 

Alert: IRS Creates Clear Path to Rental Property Loss Deductions

If you own rental properties, you want to qualify as a real estate professional. It’s a big deal. In this status, you can deduct your tax shelter losses from your real estate rental properties against your business and portfolio income. We hear that the IRS and some tax professionals are misapplying the law and wrongly denying real estate professional status. That’s an ouch! How does it happen? By mistakenly requiring an election to count multiple rental properties toward the number of hours needed to be a real estate professional.

Tax Code’s Officially Designed “Rent-to-Own Your Home” Program for Investors and Renters

In this official tax code program, the landlord-investor benefits because he has no vacancies, few hassles, no management fees, and a known cash flow. The tenant-investor benefits because he gets into this home with little or no down payment, builds equity while paying rent, and gets detailed knowledge about the property while living there. At some agreed-upon future point in time, the landlord-investor sells his or her interest in the property to the tenant-investor or the two of them sell the property to a third party.

Learn a Simple Strategy for 100 Percent Tax-Free Rental Income

The government taxes rental income just like any other income. However, a little-known loophole in the tax law may allow you to completely exclude some rental income from your income taxes. The requirements to qualify are simple, but there are some issues that could complicate your ability to use this loophole.

Two Special Tax Breaks for Retailers Who Improve Their Property

If you’re in retail, you know how useful a renovated, polished store can be in gaining the trust of your customers. Fortunately, restorations and upgrades to your property became far more financially achievable following a law Congress passed last December. Under the new rules, when you make qualifying improvements to your store, you can immediately or quickly write off much of the expense—even if the improvements cost hundreds of thousands of dollars.

Uncover New, Big 2016 Tax Breaks for Your Commercial Properties

The Protecting Americans from Tax Hikes (PATH) Act enacted last December created a new (somewhat hidden) tax break when you make improvements to your nonresidential property. Nonresidential property is any real property you don’t use for dwellings, such as offices, stores, warehouses, hotels, and motels. Don’t be one of the thousands who overlook this new tax break. It’s easy to qualify for, and it can put big, immediate dollars in your pockets.

Q&A: Does Grouping Release Prior Suspended Losses?

 

Q&A: Section 105 Plan (an HRA) for a Rental Property Business

 

Accelerated Tax Deductions for Qualified Leasehold Improvements

If you own tax code-defined nonresidential property (otherwise known as commercial property), you have to like The Protecting Americans from Tax Hikes (PATH) Act enacted last December. The PATH Act put three huge nonresidential property-qualifying leasehold improvement tax breaks in place through 2019.

Make Sure Your Real Estate Options Pay Off

You may have heard that options are the perfect way to increase profits on real estate investments and rentals. Well, perfect is probably an overstatement, but good profits are available when you know what you are doing. You also need to know the tax rules to avoid clauses, charges, and events that can turn options into sales and trigger taxes when you least expect them.

Tax Tips on Failed Rental Property Purchase

You face special tax laws when you attempt to buy a rental property and that purchase attempt fails. In general, the rules work to help you with that failed purchase, but you need to know how and when the rules work for you.

Avoid the Big Triple-Tax Whammy When Renting to Relatives

Tax savings when renting to relatives depend on your compliance with the tax law’s fair-rent standards and your relatives’ use of the property. Violate these rules and you face the triple whammy of additional taxation. And it’s easy to violate the rules, especially if you don’t know what they are.

Tax Savings Tip: Increase Office Depreciation Rate by 42 Percent

What happens when you locate a commercial office (an office in the home or a regular office) in a duplex or apartment building? It’s possible that this location can produce tax-favored depreciation for the office. This seems a little strange at first, but once you see how the rules work, it’s pretty logical.

 

Sell Home to S Corporation and Then Make It Rental Property

Take advantage of the government’s tax-free $250,000 home-sale-profit exclusion ($500,000 if married) by selling your home to an S corporation that you establish. This gives you two things: (1) tax-free income and (2) a step-up in basis for the rental house.

Four Tax Strategies That Make Buildings Produce More Cash

The tax implications for your office building and rentals have changed. Now when you fix up and improve those buildings, you need to be alert to additional savings that were not available in some prior years. Further, if you are buying a new building, you absolutely need to examine how you can create deductions where none existed before.

2016 Tax Guide to Foreclosure on a Rental Property

You likely feel some pain when you lose a rental property to foreclosure. And if you have the mortgage structured wrong, tax law adds to whatever pain you experienced with the lender. But in the right circumstances, you can lose your rental property to foreclosure and save money, too.

Golden Nugget: New Write-Offs in New Repair Regulations

Get ready to thank the IRS. With the new tangible property regulations you can write off replaced components and achieve two types of tax savings. Before the new regulations, if you replaced a roof, you likely continued to depreciate the old roof and also depreciated the new roof. The old roof—the ghost roof—usually triggered additional recapture taxes. You are going to like the new rules, especially the two new types of tax savings.

Have a Small Business? Own Real Property? Discover Repair Deductions

The tax rules for determining whether amounts you spend on your rental properties are for improvements (which you must capitalize) or repairs and maintenance (which you can expense) are complicated. But if you qualify as a small business, the IRS has a possible gift for you in the form of hassle-free and income-generating safe-harbor expensing.

Tax Implications of a Deadbeat Tenant

Renting Property to Your Business? Avoid This Trap That Destroys the Tax Deduction

Do you rent property to your business? Under the self-rental rule, you could forfeit your expected tax breaks and end up on the hook for unexpected taxes. This is true even if you create a separate entity to rent the property to your business.

Secrets to Pocketing Cash by Renting a Bedroom in Your Home

If you want to rent one, two, or twenty bedrooms in your home, you need to avoid one big trap and navigate two sets of rules to obtain the tax benefits you likely were hoping for when you thought of this rental activity. This is an area where tax knowledge is power. Without the knowledge, you could create a very unsatisfactory tax result.

Make the Closing Statement Work for You When Buying Rental Property

One of your first tax steps in buying a rental property is to go through each line item in the closing statement and assign it to one of the following three categories: (1) basis, (2) loan acquisition, or (3) operations. With basis, you allocate costs to land, land improvements, buildings (including perhaps building components), and equipment. Loan acquisition falls into either costs of getting the loan or costs to reduce the interest rate. The assignments have a direct impact on how quickly you realize the deductions.

Mortgage Interest on Rental Property—Avoid Traps, Maximize Your Deductions

You don’t automatically get to deduct mortgage interest on a rental property. Lawmakers have set traps. One trap can totally destroy the interest deduction. Another trap makes you wait a long time to realize the tax benefits of the deduction. Make sure you know what the traps are so you can avoid their impact on your bottom line.

Use Seller Financing to Create Wealth

If you are selling a rental property or your home, you should consider seller financing as a possible method to achieving a rate of return better than you are receiving from your current investments. This article gives you six ways to improve the structure of your seller financing so you can pocket more cash.

Cash In When the Buyer Defaults on Your Seller Financing

You may want to consider seller financing when you sell a rental property. It can boost your rate of return. Now, you might say “Yeah, but what happens if the buyer doesn’t pay up?” There could be a big silver lining here that you haven’t considered, and that’s why you should read this article now.

Magic Release of Rental Property Tax Deductions with a Home-Office Deduction

Your rental properties provide tax shelter when you can deduct your losses against your other income. For you to deduct your losses, you need to pass the tax code’s 750-hour test. The good news in this article is that the home-office deduction can help you pass this test in some delightful ways that you would not usually think of.

Reinstate Your Rentals as Tax Shelters

A great tax shelter is a rental property that shows a positive cash flow and a deductible tax loss. You can still have that type of tax shelter in today’s tax world. To make this work, most taxpayers, likely you included, need to avoid the investor trap to deduct their losses against all their other income (thus creating tax shelter). This article helps you avoid the investor trap so you can create the rental property tax shelter.

Double-Benefit Tax Rule for Property Owners Delivers Bonus Deduction: But Act Now!

The IRS is making an unusually nice offer to you as a business or rental property owner—but it’s good for just a few months. You can take extra deductions right now if you performed certain major renovations on your business or rental property in prior years. If you think this applies to you, act fast so you do not miss the October (or September, if incorporated) 2015 deadline.

Deduct More of Your Rental Property Losses by Qualifying as a Real Estate Professional—Even If You Don’t Work in Real Estate!

Your rental property is worth more to you than simply the generation of rental income. Your property may also create tax losses that you can use to offset your income from other sources. It’s not as easy as it used to be to make your rental property a legal tax shelter, but you can still do this if you put in the right number of hours toward the right type of work.

Use This Forgotten Tax Technique to Increase Deductions on Your Vacation or Other Home

Twenty years after the Tax Court approved a strategy that grants you extra deductions for your second home, the IRS would like you to forget it ever happened. Even though the case remains current law, you won’t find any mention of this strategy in IRS guidance to taxpayers. Unless you just happened to know old cases—or read this article—you might never have known how you could save thousands in taxes on your second home.

Claim a Home-Office Deduction for Your Rental Property Business—But Be Prepared to Meet IRS “Gray Area” Requirements

You enter a muddy legal area when you claim a home-office deduction in connection with your rental properties. Why? You must prove that you operate the rental properties as a trade or business. This article shows you the best way to meet that “trade or business” test and safeguard your deductions (and escape self-employment tax in the process).

Reduce Self-Employment Taxes by Renting from Your Spouse

If you operate your business as a sole proprietorship, the government takes a big chunk of your profits in the form of self-employment taxes. But there’s good news. With the help of your spouse, you can reduce your self-employment tax bill by using a simple rental strategy.

 

How Tax Credits Make Historic Buildings More Affordable

Would a unique downtown historic building be the perfect site for your office? It may be more affordable than you think. Your state and federal governments want you to rehabilitate these buildings and give you a financial incentive to do so. Here is their offer to you: if you invest in and restore a historic building, the governments will give you tax credits to offset a huge chunk of the cost of restoration.

Make the IRS Pay You When You Sell Your Home

You normally would not expect to have more money in your pocket after you pay your tax bill. However, with this new ruling from the IRS, you could end up with just that—a negative tax on the sale of your home! Read this article to find out how a taxpayer sold her home for a $100,000 before-tax profit and turned that into a $110,000 after-tax value.

How the IRS Lost $55,000 in This IRS Rental Properties Audit

The thought of an IRS audit is a worry, no question. But it’s worse when the IRS wants a lot of your money. And it’s even worse yet when the IRS wants your money because it interprets the law incorrectly and at the time you see the IRS adjustment, you have no idea whether the IRS is right or wrong.

Hiring Your Children to Work on Your Rental Properties

If you own rental property in your name or in the name of a single-member LLC, you report your rental property income and expenses on Schedule E of your IRS Form 1040. But what happens when you have an expense for which the IRS has not created a line item on the form? Answer: If it’s an ordinary and necessary expense, it’s deductible.

Warning: Is Your Real Estate Activity a Business or an Investment?

Here’s a trick question: should you operate your real estate activities as a business or as an investor? If you operate as a business, you can deduct trips to real estate seminars and conventions. But if you are flipping houses, you don’t want business status because that makes you a dealer and taxes you at high ordinary tax rates rather than lower tax-favored capital gains rates. Check out this article about deducting seminars and insights into how the tax law treats dealers, investors, rental properties, and more.

When You Can (and Can’t) Deduct Mortgage Insurance

When you buy a house with less than 20 percent down, your lender will almost always force you to buy mortgage insurance. This protects the lender in case you default. Tax law used to help a lot people with the cost of mortgage insurance by allowing a deduction to certain taxpayers. That selective help on personal homes expired in 2013, but there’s hope for an extension, and existing deductions continue for your rentals and office in the home.

How to Lease-Option the Sale of Your Home or Investment House

If you are looking for creative ways to get rid of a house that won’t sell, consider the lease-option. This strategy only works with the right tenant and your correct use. But get this right and it’s a nice deal for everyone involved. Make sure you avoid the traps that blow up the deal and add extra taxes to your tax bill. After all, your real purpose with the lease-option is to increase your cash flow and keep your taxes to a minimum.

Don’t Rely on the Government for a Tax-Free Home Sale

You may not expect to sell your current home or vacation property any time soon, but you should take these (easy) steps right now to prepare for—or better yet, avoid—the tax burden when that day ultimately comes. If you plan to rely on the home sale gain exclusion to shield all of your profit, don’t do that. We’ll tell you why not in this article. We’ll also show you how certain records can substantially reduce the taxes you owe on the sale of your home.

Own Rental Property? Escape the Obamacare Tax—Use New IRS Rules

Are you subject to the new 3.8 percent Obamacare tax? Do you own rental property? If so, use one of the three escapes in this article so that your rental property can avoid the 3.8 percent tax. The three escapes revolve around the concept of a rental property as a trade or business property. The IRS just released new safe-harbor rules making it easy for some owners of rental real estate to qualify their rentals as trade or business property exempt from the 3.8 percent tax.

4 Tactics That Turn Suspended Passive Losses into Tax Deductions

When you sell your rental property activity, you get a gift of sorts in that you now get to deduct the losses denied in earlier years. Tax law calls the denied losses suspended. To ensure realization of your rightful tax deductions, you need to avoid the hidden traps in this process that delay or prevent you from using your suspended losses. Make sure you know the right way to sell your rental property or activity in order to free up your losses for immediate tax deduction.

Tricky Step 1 to Making Your Rental Property Tax Deductible

If you have to show that your rental property activity rises to the level of your being in a tax-law-defined real property business, be sure to involve yourself in the day-to-day management in order to avoid the investor time trap that can cost you your current-year tax deductions for your rental property losses.

Tax and Liability Answers for Business Owner’s Rental Properties

If you are a sole business owner and also have 10 unrelated rental properties, what are the tax ramifications of the rental properties? How is the income from those properties reported to the IRS? What is the best way to structure ownership of those properties to limit your liability exposure? This article addresses these questions and more.

Repair That Vacation Home

Do you have a vacation home rental? Do you use it for both rental and personal purposes? If so, you need to know the rules on what makes a repair day. Why? Repair days do not count as either personal or rental days. And that’s only part of the story.

Tenant Improvements Bonanza to Landlord

Do your tenants improve your property? Should they? Under Section 109 of the Internal Revenue Code, landlords receive the tenant improvements at termination of the lease free of income taxes. “Tax free” is what you have to call a nice package of tax benefits.

Make Your Rental Property Losses Tax Deductible

The rental property tax-shelter game is for those who know how the rules work. Your rental property acts as a tax shelter when you can claim tax deductions for your rental property losses against your other sources of income. To qualify your rental properties for tax shelter benefits, you need proof of hours worked on your rentals. You win the tax shelter test when you (1) pass a 750-hour test, (2) pass a second, more-hours-in-real-estate test, and (3) pass an hours-worked material participation test for each shelter property or group of properties, if elected.

Rats! Related Parties Destroy Qualified Leasehold Improvements

As the landlord or the lessee, you get big tax breaks when you can take advantage of a qualified leasehold improvement. We gave you those details last month. But if the landlord and the lessee are tax law-defined related parties, you can kiss those tax-favored benefits good-bye. In this article, you learn who those related parties are so you can avoid the kiss good-bye.

Tax Deductions for Mileage to Rental Properties

How do you treat a trip from your home to your rental property? Does the trip produce deductible mileage? Or is the trip a personal commute? If it’s a personal commute, what could you do about it?

Weird, But Higher Tax Rates Increase Rental Property Profits

Our rental property analyzer reveals the truth about your rental property and gets you to bottom-line results that you can fully understand. The new higher tax rates impact your rental property. We suspect that you already knew that. But did you know that the higher tax rates could give you a better bottom line (i.e., more after-tax cash in your pocket from the investment)? This article explains how higher taxes work to your benefit.

1031 Exchange Survives Rental to Son

If you own rental properties, enjoy being in that business, and want to grow that rental property business, you need to know the ins and outs of the Section 1031 exchange. The word “exchange” is misleading; what you really do in a 1031 is sell an existing property and then buy a new property, but you do this using an exchange intermediary. It’s easy and the intermediary is not expensive. In this article you will learn how to avoid Mr. Adams’s fate as we follow him to court with an exchange that involved a rental to his son that raised issues with the IRS.

IRS Retreats on Repair Regulations

To repair or improve your property? That’s the question. But should you have to wade through 256 pages of regulations to get the answer to whether your fix-up is a repair or an improvement? Perhaps not. The IRS is giving you an out on those 256 pages, at least until 2014

Ouch! Court Rules That This Investor Is a Real Estate Dealer

Do you invest in real estate? Are you an investor or a dealer? Make sure you put the nine factors to work for you in your proof of investor or dealer status.

Tax Deductions Lost in Owner’s Equipment Rentals to His Corporation

If you, or another entity you own, rent buildings or equipment to your business activity, you likely face the self-rental rules. If you are unsure of what the self-rental rules mean and you have these types of rentals, you absolutely need to read this article.

How to Release Rental Property Tax Losses Trapped by the Passive-Loss Rules

Tax law’s passive-loss rules are pretty much the grim reaper of current-year tax benefits from your rental properties. Note the words “current year.” Those passive losses trapped this year are available down the road. With planning, you might be able to release those trapped tax benefits when you want.

Buy the Building, Rent It to Your Business, Avoid the Self-Rental Trap, and Create Legal Protection with Tax-Deduction Shelter

As you know from last month’s article, the self-rental rules can catch you unaware and alter your rental property tax benefits. You can solve the self-rental problems by eliminating the rental and having your business own the building. That’s one solution. This article gives you a second solution that you might like better. Here, we show you how to qualify for a special election that allows you to treat your rental and your business as one activity for federal tax purposes. This can give you the best of both worlds: (1) legal protection and (2) tax shelter.

Finding Tax Deductions for Your Timeshare When You Use It Personally and/or Rent It

Your timeshare can qualify as a second home for the mortgage interest deduction easily if you don’t rent or attempt to rent it. Once you introduce rent into your timeshare equation, you trigger two tough rules: (1) a special mortgage-interest-deduction rule for the personal part of the timeshare and then (2) the dreaded vacation-home rental rules for the rental part.

Renting the Office to Your Business Creates a Self-Rental Trap That Crushes Tax Deductions

When you rent to a business in which you and/or your spouse work 500 hours or more, you engage in a self-rental that limits your loss deductions and taxes your profits. In other words, you get tax law’s double whammy. There is one solution to this problem.

Taxes You Pay When You Convert Your Rental Property to Your Principal Residence

The days when you could convert your rental property or vacation home to a principal residence and then use the full $250,000/$500,000 home-sale exclusion to avoid taxes are gone. Today’s law requires an allocation that keeps part of your rental as a rental so you have to pay taxes on that allocated part.

Tax Guide to Deducting Your Timeshare Stays as Business Lodging Costs

Could you use your timeshare for business lodging and other business purposes? If so, why should you consider it? Business deductions usually produce better tax benefits than personal deductions do, that’s why. Further, you need to know those special tax rules that can make your timeshare a rental property, personal residence, or business lodging facility.

New IRS Regulations Hammer Tax Deductions for Repairs, But Also Allow a New Deduction

If you own rental property or your business’s building, you need to know what the IRS has in its new set of regulations that define when you have a tax-deductible repair and when you have an improvement that you must capitalize and depreciate. Repair deductions are best, but these are likely a little more difficult to achieve under the new regulations. Also, the new regulations contain a big new break that allows a write-off of the old component’s adjusted basis.

Sale of Three Rental Properties Releases Passive-Loss Deductions on Six Rental Properties

If you own rental properties, you need to know how to qualify for real estate professional status, and then you need to create proof of time spent on your rentals. No time-spent proof, no passive-loss deductions. Next, you have to decide to group or not to group your properties. Don’t leave this grouping decision to the IRS or to the courts.

Property Manager Reports Gross Rental Income to the Property Owner and to the IRS on Form 1099-MISC

Rental property managers report gross rental income to the property owners on a 1099-MISC. We have seen confusion about this reporting because new laws were enacted in 2010 and then repealed in 2011. This article eliminates that confusion and explains what the property manager needs to report and what the property owner can expect to receive.

IRS Arrives at the Audit with Tax Assessor’s Allocation to Land and Building

On your rental properties, you need proof of your cost allocation to land and depreciable buildings. If you have no proof of that allocation, the IRS has started using the Web to grab the tax assessor’s allocation and use that against your depreciation deductions.

Single-Member Limited Liability Company (LLC) as Choice of Entity

In the right circumstances, the single-member limited liability company (LLC) gives you corporate liability protection combined with easy Schedule C (proprietorship) rules for your tax return. In this article, you learn the two tax advantages and two tax disadvantages to the single-member LLC.

Tax Court Denies Rental Loss Deductions on Four of Six House Rentals

The government subsidizes your rental property profits when you realize all your tax deductions. If tax law’s passive-loss rules deny your current rental losses, your profits will go down. Therefore, you need to know how the passive-loss rules work so you can maximize your rental profits and avoid unpleasant visits with the IRS.

Create Both Tax-Free Income for Mom and Dad and Business Travel Deductions for You

Stay with your mom and dad on a business trip, and create tax deductions by paying them for business lodging. You have a choice: deduct the cost of staying at the big hotel downtown or deduct the cost of staying with your parents. Either way, the choice of location does not change the fact that you are on a tax-deductible business trip.

Tax Breaks Start When Business or Rental Activity Starts

You trigger business deductions once you start your business. Thus the question: Which triggers do you need to pull for the business to start?

Tax Loss Crushed by Passive Loss Rules on Rental Property Investment

If you own rental property, you need to pay attention to the passive-loss rules. This court case helps clarify two rules that can enable deductions for rental property losses.

Short-Term Rental Creates Hotel, Destroys Rental Loss Deductions

The real estate professional exception that can create rental property loss deductions does not apply to properties rented for an average of seven days or less.

Tax Tips for Lawns and Landscaping

You want repairs and maintenance deductions on your business and rental properties. Here are tax tips on finding tax deductions in your lawn, landscaping, and other land improvements.

Tax Saving Tips: How Repairs Put Extra Cash in Your Pocket

The repair deduction can substantially outperform the capitalized improvement. The added cash comes from two sources.

Better Tax Deductions for Repairs to Business and Rental Buildings

Tax law penalizes depreciation deductions, whereas it rewards repair deductions. The impact on your net worth can be huge. This article helps you qualify for the repair deductions that increase your net worth.

Tax Tips for Repairs—A Short Litany

Spend a few minutes looking at the list in this article to see what qualifies as a repair. Then spend another minute on the list of improvements. This will help you decide what you need to do to your property.

Tax Tip: The Classic Repair—the Farmer’s Creamery Case

Repairs to property produce more after-tax cash than improvements do. If you invest in property, you should pay close attention to the rules on what is a repair versus what is an improvement.

Tax Tips for Landlord’s Snowblower Deduction

The properties owned and the activities of the landlord determine whether the landlord can Section 179 expense a snowblower in whole or in part.

Tax Tips to Find a Profitable Rental Property

This article contains our Rental Property Analyzer software to help you analyze your possible real estate investments in an absolutely understandable and meaningful way. If you are thinking of buying a rental property, you absolutely, positively must read this article and use this software, which is included in your subscription.

Tax Tips for Rental, Non-Rental, and Business Losses

You want to deduct your business, rental, and non-rental losses when possible, because those deductions put cash in your pocket. The sooner you get the cash, the faster you can put that cash to work for you building your net worth. This article helps you realize those losses sooner.

Tax Tips for Rental of Ski Cabin

The cabin at the ski hill could be a hotel, a residential rental property, or a personal residence. It depends on your personal use of the property; the length of rental periods; and documentation of your time, others’ time, expenses, and activities.

Tax Tips for Section 179 Expensing of a Motor Home

This subscriber is going to buy a motor home and use it during the first year for travel to and from conventions. In the second year, he is going to convert that motor home to a transient rental property. His plan meets the qualifications for Section 179 expensing and avoids recapture.

Tax Tips for the Real Estate Investor/Dealer

Tax law allows an individual to be a real estate dealer with respect to his dealer properties and a real estate investor with respect to his investor properties.

Tax Tips That Unearth Section 179 Deductions in Lodging Properties

Your lodging property may qualify for one or more of four exceptions that allow Section 179 expensing. The four exceptions override the basic rule that you may not claim Section 179 expensing on property used primarily for lodging or in connection with the furnishing of lodging

Tax Savings Tips When Renting to Relatives

Tax savings when renting to relatives depend on your compliance with the tax law’s fair-rent standards and your relatives’ use of the property. Violate these rules and you face the triple whammy of additional taxation.

Tax Deductions for the Business Town House

Doing business in two different locations requires tax knowledge. The purchase of a town house in the second location brings up many tax planning opportunities and a few hazards to avoid.

Tax Savings Tip: Increase Office Depreciation Rate by 42 Percent

What happens when you locate an office (home office or other office) in a duplex or apartment building? It’s possible that this location can produce tax-favored depreciation for the home office.

Tax Tips Needed on Land and Self-Rental Passive Loss Traps

The tax strategy of renting property you own personally to your businesses needs your attention if you want tax benefits. Similarly, special recharacterization rules apply to rentals of land and also when land is a big part of the rental.

Defining “Real Estate Investor” and “Real Estate Dealer”

The first good news is that you can be both real estate investor and real estate dealer with respect to your real estate portfolio. The next good news is that you are in control, and by knowing just a few rules about dealer and investor classification, you can do much to increase your net worth.

Qualify as a Real Estate Professional to Deduct Rental Losses

If the passive loss rules are taking away your tax deductions on your real estate rentals, examine the real estate professional rules for an escape. You can be a lawyer, medical doctor, etc., and also qualify as a real estate professional.

How to Materially Participate to Deduct Rental Property Tax Losses

You can be a lawyer, CPA, MD, or business owner and qualify as a real estate professional if you or your spouse materially participate in the rentals or in the rental group.

Qualifying for Rental Real Estate’s Tax-Favored $25,000 Allowance

Learn how to qualify for the rental real estate active investor category for deducting rental property losses of up to $25,000. You can plan deductions to lower the $100,000 and $150,000 ceilings.

Audit-Proof Your Time Spent on Rental Properties

To deduct your passive losses as a real estate professional, you must prove time spent. Since you need this proof, use these tactics to keep track of your time and also increase your overall profits on the rentals.

Rental Property Business Tax Attributes

If you own rental properties, you don’t want the tax law to call the rentals an investment. Instead, you want the rental properties to qualify as a trade or business so that you achieve tax favored Section 1231 treatment and other tax breaks.

Cashing Out Real Estate Profits without Section 1031

Section 1031 exchanges are perfect when you are going to stay in the real estate rental or investment business. When it’s time to cash out, you need to look at different strategies that help you avoid taxes and give you cash to spend (liquidy).

How 1031 Real Estate Exchanges Work

This article gives you the nuts and bolts of the Section 1031 real estate exchange, including how with proper planning the Section 1031 real estate exchange can be nothing more than the sale of your old real estate and the purchase of the replacement real estate.

IRS Audits Expanded to Six Years for Overstatement of Basis

If you understate your gross income by more than 25 percent, the IRS can adjust that return for six years, rather than the traditional three-year statutory period for audits. In this clarifying regulation, the IRS explains that an overstatement of basis counts as an understatement of gross income for the 25 percent test.

Home Equity Loans Pros and Cons—Learn How to Avoid Tax Pitfalls

Your home equity loan can give you a full, partial, or no deduction for your interest. If you will get zero or a reduced benefit, make the necessary changes to protect your tax benefits.

 

How Does a Home Equity Loan Work with a Rental Property LLC?

If you are using home equity loan proceeds for your rental property LLC, you need to pay attention to both the legal and tax aspects of that transaction. The legal part is needed for liability protection. The tax part is needed to ensure your tax deductions.

Rental Property Tax Rule Surprise—How to Avoid

Whenever possible, you want your rental property to avoid the Uniform Capitalization Rules. If you don’t meet the de minimis rule on your improvements to a rental property, you may have to (1) capitalize the interest and (2) capitalize the direct and indirect costs.

About Time! A True Tax Credit for First-Time Home Buyers

Higher inflation could be good for that home you buy today—and if you buy today, you will have today’s low interest rate. That’s a pretty good combination. Then add the 2009 tax credit and get the government to pay you $8,000 for taking the chance. Sounds like you hit the trifecta doesn’t it?

Real Estate Agent Is a Real Estate Broker for Passive Loss Rules

A real estate rental is automatically in the passive bucket if you do not qualify as a real estate professional. In this court case, a real estate agent qualified her real estate agent work time as time spent in a real property trade or business. Thus, she qualified to deduct her real estate rental property losses.

Real Estate Agent Avoids Passive Losses

Two tax attorneys told our group that time spent as a real estate agent actually worked against you for the time test (more than 50 percent) to qualify as a real estate professional. The attorneys claimed that in audits the IRS is disallowing the unlimited loss to people who are full-time agents, treating their agent work time as non–real estate time and thus making it just about impossible to meet the 50 percent test.

Best Entity for Rental Real Estate

The most recent hot entity for real estate ownership is the LLC. The fact that it’s hot does not necessarily make it the best option for you. When considering your choice of entity, examine qualification for single-member LLC status, extra state income taxes, and how this compares with the S or C corporation possibilities.

Section 105 Plan for Rental Properties

When a couple owns an LLC, they can obtain the benefits of a section 105 medical plan by filing as a single member LLC.

Bad Loan

There are two types of bad debts: business and nonbusiness. Nonbusiness bad debts are deductible in the year the loan is worthless. A business bad debt is deductible either in the year it becomes worthless or to the extent you can prove its decline in value. This is far easier. But, you need to prove your writeoff to get the deduction. We’ll show you how.

New Housing Rescue Law Destroys Vacation and Rental Home Sales Strategy

Before this new housing rescue law, the savvy taxpayer could convert his old rental or vacation home into a principal residence, live in it for two years, and then sell it to take advantage of the $250,000 and $500,000 exclusion of gain rules. Now, you need to make revisions to that old tax plan to cope with this new law.

IRS Grants Extension to Group Rental Properties

Mr. and Mrs. Clark hired a new tax advisor. He told them that because they qualified as being in the real property business, they had available to them the tax law option of “group or not group” your rental properties and that grouping could release tax deductions currently trapped by the passive loss rules.

This Might Be the Perfect Time to Buy Your Rental Property

Good prices and low interest rates make this a good time to buy real estate. Also, tax law favors investing in real estate over stocks and bonds. Use the after-tax adjusted rate-of-return formula to see your after-tax results of your investment.

Vacant Rental Property

Rental property treatment starts on the day you place the property in service for rental use, not when you install a tenant. We answer one taxpayer’s questions about reporting a rental house for which he found no tenant.

How Self-Directing Your Retirement Plan Can Work to Your Benefit

Don’t waste time and money in a bad retirement plan. Your IRA can accumulate great wealth for your retirement when done properly. A self-directed retirement might be the answer for you.

Doctor’s Case Highlights Passive Loss Strategies

Learn from Dr. Uy’s mistakes: prepare your taxes correctly. In his case, he should have hired a tax advisor and preparer that would have saved him thousands of dollars. See what you can do to avoid his mistakes.

Dealer or Investor

One taxpayer fixed up a house to sell it for a net loss. To save money on taxes, he can file as a real estate dealer, and not as an investor. Precedents and technical definitions help his case.

Pocket Self-Employment Taxes by Renting from Your Spouse

If you are single, forming an S corporation can be your “no-hassle spouse.” Rent from the corporation, and you can save money in self-employment tax.

WOW! IRS Creates Safe Harbor for 1031 Exchanges of Vacation Homes and More

The two most magic words in tax law are “safe harbor.” Why? Clarity! There is nothing better than true clarity in the tax law. The IRS has created a safe harbor for exchanges of homes, and gives us very clear parameters on how to use them.

Renting to Your Corporation Does Not Produce Passive Income

Learn from one taxpayer’s court case: know the rules about renting to your corporation before claiming passive income.

Rental Loss Not Deductible

Carolyn Federson lost all of her rental property loss deductions when the court rejected some of the details of her rental property time records and made its own estimate of the time she spent on her rentals.

 

IRS Audit

One taxpayer is audited, and told incorrect information by an IRS agent. We give her proof to support her position.

Real Estate Joint Venture

As a two-person real estate team, these two taxpayers are real estate dealers, according to the tax law. They have two choices: file as a partnership or as an S corporation.

Tax Guide for Debtors on Foreclosure of Rental Property

Tax law treats foreclosure on your rental property as a sale of your rental property. When you sell a rental property, you have a capital gain or loss, or a Section 1231 gain or loss. This differs from a home.

 

IRS Audit of Rental Properties

The ability to deduct rental property losses can alter investment returns by as much as 40%. In many cases, the ability to deduct the losses can make the sole difference in making a profit or incurring a loss on the rental.

Tax Guide for Vacation Rentals

If you own a condominium, cottage, cabin, lake or beach home, ski lodge, or similar property, tax law might consider your property a hotel. The purpose of this article is to alert you to the tax issues that surround a vacation-home hotel.

Court Declares $68,796 Rental Loss Passive

To win your rental property deductions you need proof of the time spent. This taxpayer had inadequate proof.

Dealer or Investor?

Dealer versus investor tax status is a heavily litigated issue. Choosing between dealer or investor status is often a tough call, as is in the case of this taxpayer. There can be a huge tax difference between classification as a dealer or classification as an investor.

Home Office with More Than One Business

To deduct things in a home office, they must be used exclusively for business use. Not one minute can be personal use. Should you have a use that fails the exclusive business-use requirement, that one failed use disqualifies your home-office deduction.

New Entity to Manage Properties

One subscriber asks about making a corporation for his rental houses, and then using a proprietorship to do the management. He would charge a fee to the rentals. We don’t think this is a good idea because it will increase his taxes.

Nontaxable 1099

Not reporting the 1099 information is always a mistake. If you have a rental property that you rented less than 15 days this year, it is not taxable. If you do get a 1099, you should include it in your tax return, but follow our strategy to avoid any problems.

Repairs to Make the Home a Rental

If you make repairs to your home for the purpose of making the home a rental property, you may deduct them, if you do it right. You cannot, for example, deduct repairs made to your home (not rental property). You might also consider filing the improvements as capital expenditures.

Wages on Schedule E

Schedule E allows wages, but it does not have a separate line item for them. So, when you are hiring your spouse to work on your rental properties, file the work as “ordinary and necessary expenses to save money on taxes.

Real Estate Investment Seminar

This real estate boot camp deduction is allowed to the taxpayer who is classified as being “in the business” of renting real estate, but not to the taxpayer classified as an “investor in real estate.”

Mortgage Insurance on Rental

Although IRS publications give you no guidance, you may deduct mortgage insurance on your rental properties. The IRS confirms this in its answers on its Website.

New Rules for Writing Off Leasehold Improvements

New rules increase the tenant’s ability to first use shorter depreciation periods during the life of the lease and then write off the undepreciated balance of leasehold improvements at the end of the lease. The proper application and intertwining of the new rules enable both landlords and tenants to put cash in their pockets.

Qualifying for the 1031 Exchange on a Vacation Home

The tax rules make your vacation home either a personal residence or a rental property. When you qualify the vacation home as a rental property, you then may use the Section 1031 rules to defer taxes and build more net worth.

Four Major Rental Property Questions Answered: (1) Deducting Rental Losses, (2) Grouping Properties, (3) Tracking Rental Property Time, and (4) Material Participation

To treat your rental property as a tax shelter and deduct your rental property losses against non-passive income, you first need classification as a real estate professional and then you need material participation on the individual properties, or if grouped, on the group. Good and proper tracking of time spent by you and, if married, your spouse is required to prove both your real estate professional status and material participation.

Taxable Parts of Rental Property Sale

Taxpayer sells this rental property for $199,000 with $6,000 in closing costs. He paid $118,500 for the property over 10 years ago and has claimed $50,000 in depreciation deductions. As part of this sale, the taxpayer takes back a second mortgage in the amount of $19,400 payable in five years with interest paid annually at 10 percent a year. There are five easy steps to this installment sales tax calculation.

How Depreciation on Your Business or Rental Property Works

How you depreciate property has significant effects on your after-tax cash realization. Further, the punitive effects of depreciation recapture taxes make the Section 1031 exchange possibilities more and more appealing. That’s why it is important to remember the eight financial planning principles about depreciation.

Any Personal Use Destroys the Business Rooms at a Bed and Breakfast

Tax benefits for the bed and breakfast require adherence to the transient, vacation home, and hotel rules. Under these rules, personal use can destroy deductions. Further, the length of transient stays determines the types of services you need to provide, if any, to qualify the bed and breakfast for tax-favored hotel benefits.

Will the S Corporation That Owns Rental Property Terminate with Too Much Passive Income?

At a meeting of landlords, the guest lawyer stated that the S corporation terminates with too much passive income. Many attendees heard this comment incorrectly. The too much passive income termination problem applies to S corporations which were previously C corporations.

How the Business Condo Escapes the Tough Tax Rules

The properly used business condo does not run up against the vacation-home, passive-loss, or entertainment-facility rules.

How Shared Equity Protects the Rent-to-Own Arrangement

Shared equity is tax law’s officially designed rent-to-own your home program. For this to work, it takes two parties: (1) a landlord-investor and (2) a tenant-investor. The landlord-investor benefits because he has no vacancies, few hassles, no management fees, and a known cash flow. The tenant-investor benefits because he gets into this home with little or no down payment, builds equity while paying rent, and gets detailed knowledge about the property while living there. At some agreed future point in time, the landlord-investor sells his or her interest in the property to the tenant-investor or the two of them sell the property to a third party.

Bed and Breakfast Joke

Personal use of your bed and breakfast includes use by your tax-law defined relatives, including those relatives who pay fair rent.

Jack Up Your Profits with Tax Credits

Historic rehab tax credits can put you in Donald Trump’s self-proclaimed favorite spot. Tax credits often exceed the cash you invest in the project making the historic rental or office building a “nothing down” deal for you. Add nonrecourse financing to the package and you have no personal risk. None of your cash in the deal and no personal risk—this is Mr. Trump’s favorite spot. You might do as many Congressional leaders do: Donate your personal home’s historic facade to charity so can realize big tax credits.

Who Owns This Property?

When you receive property in which you had an interest as a result of a family member’s death, make sure you clarify your income-tax basis in this property right away.

Interest on Refinanced Rental

The security for the loan does not determine if the interest is tax deductible or not.