Steven Hamilton II, EA Contact: https://hamiltontax.net
First, your rental income is all rent received even prepaid for the next year. However, security deposits are not considered rental income because the security deposits belong to the tenants unless it’s used for repairs.
Second, here are the rental property tax deductions for 2020:
1. Cleaning and Maintenance
Any fees or cost-related to maintaining your rental property can be a rental property tax deduction under your Schedule E when filing taxes. Such maintenance can be landscaping, cleaning, or even snow removal.
It’s really important to understand the difference between improvement vs repairs.
Repairs are your everyday items such as broken faucets or broken windows. These are necessary expenses to usually replace an existing item. They don’t necessarily add more value to the property.
Improvements directly impact the value of the property. A good example is if you improve a gravel driveway to an asphalt driveway.
2. Rental Property Depreciation
You can depreciate the residential rental property for 27.5 years (Straightline Depreciation)
3. Cost Segregation
Using our driveway example, the current tax codes allow us to accelerate the depreciation of the driveway all in the current year. So if the cost of improving the driveway is $3,000, we can depreciate the entire $3,000 for the tax year.
General Tip… If the expense is $2500 or lower, we generally write it off even if it’s an improvement.
When Steven C. Hamilton II EA founded the firm on the preface of providing expert bookkeeping and tax services to our clients from both our office location and through digital means. We provide all levels of business services from tax preparation and consulting to CFO services to clients worldwide.
Steven Hamilton, II EA runs an office of Enrolled Agents. Wondering what an Enrolled Agent is? Enrolled Agents (EAs) are federally licensed tax practitioners who have technical expertise in the field of taxation and are licensed to represent taxpayers for audits, collections, and appeals before the Internal Revenue Service at administrative levels. Enrolled Agents are the only tax practitioners required by federal law to maintain their expertise through continuing professional education. (National Association of Enrolled Agents.)
Steven Hamilton provides quality continuing education through our partner Gryphon CE. He provides quality advanced education to those looking to advance their tax knowledge. You can sign up even as a non-tax professional to learn everything from basic tax to advanced concepts and audit representation.
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