Tax Preparation Tips for Rental Property Income | Tax, Finance, CE ...

Before the year is completely over, professionals engaged in tax preparation careers should convey information that will help people who collect rents. When landlords learn the records to compile, they can start early on the process of sorting and organizing. That?s a lot easier to conquer during the autumn than waiting until after year-end.

Property owners with rental income who hastily assemble tax records after January 1 usually omit information or have data that is unclear. This precipitates tax preparation questions. The result is a slower process in completing the tax return and a lower likelihood of capturing all eligible expense deductions.

In some cases, people with rental properties use management companies. They incorrectly believe that the property manager neatly compiles all tax information. Unfortunately, this isn?t always the case. By giving a few tax preparation tips to landlords, they are better equipped to understand their tax record keeping requirements as well as tax consequences.

A list of tips that?s limited to tax class basics is easiest to understand and execute. Sometimes the best tax preparation help involves simple advice. This is especially true for most owners of rental property. They want to assure accuracy and thoroughness with their tax returns but are most likely to hire a paid preparer professional for the finer details.

Therefore, an avenue to capturing the loyalty of property owners for tax preparation services is providing helpful advice ? starting with these tips.

Count all rent money when received as rental income, regardless of the period it covers. Therefore, advance rent counts for the year it?s paid. If a tenant is delinquent and catches up in the next year, the income is counted for that next year. But, a security deposit is not rent income if the tenant expects its return after the lease expires.

Any expenses paid by a tenant and subtracted from rent payments are included in gross rental income. They are then deducted as rental expenses just like those paid by the property owner. The same principle applies to services provided by a tenant in lieu of money. Therefore, some rent income is calculated even when a tenant lives ?rent-free? in a house but pays the real estate taxes of the property owner, mows the yard, and performs repairs.

Expenditures that improve the value of a rental property are not tax-deductible in the year paid. They are capital costs that must be depreciated over several years. Deductible expenses include insurance, homeowner?s association dues, mortgage interest, real estate taxes, maintenance and repairs. Separate totals are required for each category in order to assure accurate preparation of the income tax reporting.

IRS Circular 230 Disclosure

Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.

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Source: http://ffaadmin.wordpress.com/2011/09/06/tax-preparation-tips-for-rental-property-income-2/

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