Property Manager MA: Rental Property Owner Tax Tips

Property Manager MA

Property Manager MA: Rental Property Owner Tax Tips

Tax season is a tough time of the year especially for those who own rental properties. There is a different tax scheme for rental property owners.However it is not rocket science as it can be sorted out if you take the right steps.


So if you want to add your rental property to your tax returns, you need to refer to Schedule E. It refers to your rental income and the various expenses. You can also add mortgage interest, property tax,  repairs, utilities, property management fees, depreciation, and all other costs associated with owning the property.

The points system is different for rental properties as you can only deduct them over the life of your loan instead of on the year it was paid. The rental income is only taxable if it exceeds expenses. If not then you will not be taxed.

If the expenses go beyond the rental income, then you can deduct losses if your non-property income is $150,000 a year. If it’s $100,000 then you can deduct up to $25,000 annually. In the event that you earn between $100,000 and $150,000 then the benefits are cut into half. This does not apply if you earn more than $150,000 annually.

If for any reason you make a lot of money, then you won’t be able to deduct rental property losses regardless of what happens. The authorities believe that the losses can offset the capital gains.

You also must pay capital taxes, when you sell a rental property. It is a good idea to get a tax adviser to help you with that. The way it goes is that you have to subtract the purchase price, cost of improvements and the total selling cost (including all fees). The remainder is your capital gain, out of which you have to pay federal and state taxes on.

Property Manager MA: Avoid Capital Taxes on Rental Property

The best way to avoid it is to show the intent that you want to buy a new rental home after you sell the current one. You have to use the IRS benefit which is called the 1031 Exchange. This will allow you to put off paying the capital gains taxes at closing. However you have to identify which new rental property you are going to buy within 45 days. You also need to close the new purchase within 6 months of closing your sale.

To get the full tax benefit, the new purchase must be of the same or greater than your sales price, and you must put every penny of net proceeds from the sale into the new purchase.

We hope you liked our post “Property Manager MA: Rental Property Owner Tax Tips”.


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