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- DB(k) retirement plans are new this year
- Pay yourself reasonable wages
- The kiddie tax: A basic review
- Follow IRA withdrawal rules
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- Collectibles face special tax rules
- Rental property tax rules are complicated
- Payroll tax update
- Don't overlook the Roth five-year holding requirement
- Can you qualify for the small business health insurance credit?
- Military tax breaks are available
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- Roth IRA conversion: Act now, pay later?
- Start your 2010 planning with your 2009 tax return
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- Who has to file an income tax return?
- New law allows early deduction for Haiti relief donations
- The dependency exemption: What you need to know
- What's your status?
- Payroll - A 2010 employer update
- Review payroll reporting for 2009
- What to expect on your 2009 return
- Check these vehicle tax breaks for 2009
- Know the rules for backup withholding
- Tax issues come with gifting stock
- Hiring seasonal employees? What you need to know
- Don't get tripped up by a wash sale
- New law includes two important tax changes
- Two IRA tax breaks are scheduled to expire soon
- Take a tax deduction for worthless stock
- Withdrawals from your SIMPLE IRA may not be so simple
- Savings bonds can help pay for college
- Tax tips for first-time employers
- First-time homebuyer credit to expire November 30
- Closing your business has tax implications
- You need basis to deduct an S corporation loss
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- Some IRA terms you should know
- Employee or independent contractor? Don't misclassify workers
- Take a penalty-free IRA withdrawal for medical expenses
- Your business vehicle expenses are deductible
- Plan for the phase-out of tax breaks
- Your business could benefit from the extended net operating loss carryback
- When is income taxable, and when is it not
- IRS has a new procedure for correcting payroll returns
- Capture tax breaks when you refinance
- Prepare now for a possible disaster
- Tax law changes could affect your 529 plan
- Two reasons to review tax payments
- The COBRA credit: What employers must know
- Don't waste your tax refund
- A new vehicle could give you a new tax break
- Check out the "making work pay" credit
- Don't overlook a theft loss deduction
- Who owes self-employment tax?
- The Internal Revenue Service and Treasury Department Release Additional FBAR Guidance
- HIRE Act
- Health Care Updates
News
Rental property tax rules are complicated
Whether you're an intentional landlord or an accidental one, you may have questions about how to report rental income and expenses. That's understandable. The rules are complex. Even the IRS admits it, saying errors related to rental real estate activities contribute to what's called the "tax gap," a measure of tax law compliance.
Here are three areas where rental property tax rules differ from what you might expect.
- Depreciation. You're probably familiar with immediate expensing rules, also called Section 179. Using these rules, you write off the cost of business assets in the year you purchase them. But did you know Section 179 is generally not available for residential rental property?
Typically, you'll depreciate residential rentals over 27.5 years. Appliances, carpeting, and furniture are depreciated over five years.
- Rental losses. When rental expenses exceed income, the loss may not be deductible on your current year federal income tax return. Your income level and your participation in managing the property affect the deduction of any losses.
Losses you're unable to use in the current year are "suspended." Suspended losses can be applied against income from your rental in future years and can also reduce gain when you sell your property.
- Sale of rental property. Depending on how you acquired your rental, the tax basis - the amount used to calculate gain or loss when you sell - may not be your cost.
For instance, say you used the property as your personal residence before renting it. In that case, your basis could be the fair market value of the home on the date you converted it to a rental instead of what you originally paid.
Special rules may also apply if you made a former rental property your residence.
Please call if you need details on the tax treatment of rentals.
For more information, contact Ross Rizzo at 212-404-5528, rrizzo@sb-cpa.com.
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