Improperly claiming deductions for rental expenses
While it’s essential to claim all eligible deductions to reduce your tax liability, it’s also vital to ensure that you’re claiming them correctly and within the guidelines set by the IRS. This includes property taxes, mortgage interest, repairs, maintenance, and other costs associated with owning and operating a rental property. However, some landlords may overclaim expenses, claim expenses that are not eligible, or fail to provide adequate documentation to support their deductions. To avoid these issues, it’s essential to keep accurate records of all rental expenses, know which expenses are eligible for a deduction, and consult with a tax professional to ensure that you’re claiming deductions correctly.
Misreporting rental property depreciation
Depreciation is a tax deduction that enables landlords to deduct the rental property’s cost over a span of years. They may fail to recapture depreciation upon the property’s sale or misclassify it as residential or commercial. To avoid these issues, accurately calculate and report rental property depreciation on your tax return, keep detailed records of their value, and consult with a tax professional if necessary to ensure that you’re claiming depreciation correctly.
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