This bestseller is the only book on tax deductions specifically for residential landlords! Named a "Top 10 Real Estate Book of 2005" by Robert Bruss, syndicated real estate columnist If you own rental property, you should be taking advantage of the many tax write-offs available. Every Landlord's Tax Deduction Guide gives residential landlords the plain-English guide they need to save money on taxes -- without the services of a high-priced accounting firm. This book explains how to maximize your deductions. Find out how to: fill out IRS Schedule E take real estate tax credits figure out if an expense is a repair (deductible) or an improvement (depreciable) maximize your depreciation deductions deduct losses arising from real estate ownership keep proper tax records deduct home office, travel, casualty losses – and much more Every Landlord's Tax Deduction Guide is comprehensive yet easy to read, jam packed with interesting and relevant examples. The 2nd edition is completely updated to reflect the latest tax information and numbers.

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The tax code is full of deductions for landlords. Before you can start taking advantage of these deductions, however, you need a basic understanding of how landlords pay taxes and how tax deductions work. This chapter gives you all the information you need to get started, including: how the IRS taxes landlords (Section A) how tax deductions work (Section B) how forms of property ownership affect landlord taxes (Section C), and IRS audits -- how they work and how to avoid them (Section D). A. How Landlords Are Taxed When you own residential rental property, you are required to pay the following taxes: income taxes on rental income and profits from property sales property taxes, and Social Security and Medicare taxes (for some landlords). Let's look at each type of tax. 1. Income Taxes on Rental Income You must pay federal income taxes on the income (rent and other money) you receive from your rental property each year. When you file your yearly tax return, you add your rental income to your other income for the year, such as salary income from a job, interest on savings, and investment income. This book covers rental property deductions for federal income taxes. However, 43 states also have income taxes. State income tax laws generally track federal tax law, but there are some exceptions. The states without income taxes are Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. For details on your state's income tax law, visit your state tax agency's website, or contact your local state tax office. You can find links to all 50 state tax agency websites at www.taxsites.com/state.html. 2. Income Taxes on Profits When You Sell Your Property When you sell your property, any profit you earn is added to your income for the year and is subject to taxation. Profits from the sale of rental property owned for more than one year are taxed at capital gains rates. These rates are generally lower than income tax rates -- usually 20% lower, except for taxpayers in the lowest tax brackets. (See Chapter 5 for an example of the tax effects of a rental property sale.) However, you may be able to defer tax on your profits -- perhaps indefinitely -- by selling your property through a like-kind exchange (also called a Section 1031 exchange or tax-free exchange). This kind of exchange involves swapping your property for similar property owned by someone else. These property swaps are subject to complex tax rules that are beyond the scope of this book, since they have nothing to do with income tax deductions. For more information, see IRS Publication 544, Sales and Other Disposition of Assets. 3. Social Security and Medicare Taxes Everyone who works as an employee or who owns their own business must pay Social Security and Medicare taxes. These are two separate taxes: a 12.4% Social Security tax, up to an annual income ceiling or cap -- in 2005, the cap was $90,000 per year, and a 2.9% Medicare tax on all employee wages or self-employment profits. Together, these amount to a 15.3% tax, up to the annual Social Security tax ceiling. Employees pay half of these taxes themselves and their employers pay the other half. Self-employed people must pay it all themselves. You may have to pay (and withhold) Social Security and Medicare taxes if you hire employees to work in your rental activity -- for example, if you hire a resident manager. The employer's share of such taxes is a deductible expense. (See Chapter 12.)

 

This bestseller is the only book on tax deductions specifically for residential landlords!

Introduction A. Why You Need to Know About Tax Deductions B. The Ever-Changing Tax Laws C. Icons Used in This Book 1. Tax Deduction Basics for Landlords A. How Landlords Are Taxed B. How Income Tax Deductions Work C. How Property Ownership Affects Taxes D. The IRS and the Landlord 2. Landlord Tax Classifications A. The Landlord Tax Categories B. Business Owner Versus Investor C. Are You Profit Motivated? D. Real Estate Dealers 3. Deducting Your Operating Expenses A. Requirements for Deducting Operating Expenses B. Operating Expenses That Are Not Deductible 4. Repairs A. Repair Versus Improvement B. The General Plan of Improvement Rule: A Trap for the Unwary C. How to Deduct Repairs D. Tips for Maximizing Your Repair Deductions 5. Depreciation Basics A. Depreciation: The Landlord's Best Tax Break B. Understanding the Basics C. How to Depreciate Buildings D. Depreciating Land Improvements E. Depreciating Personal Property F. When You Sell Your Property G. Tax Reporting and Record Keeping for Depreciation 6. Maximizing Your Depreciation Deductions A. Determining the Value of Your Land and Buildings B. Segmented Depreciation 7. Interest A. Interest Landlords Can (and Can't) Deduct B. Mortgage Interest C. Other Interest Expenses D. Points and Prepaid Interest E. Interest on Construction Loans F. Loans With Low or No Interest G. Loans on Rental Property Used for Nonrental Purposes H. Keeping Track of Borrowed Money 8. Start-Up Expenses A. What Are Start-Up Expenses? B. Determining Your Business Start Date C. Avoiding the Start-Up Rule's Bite D. How to Deduct Start-Up Expenses E. If Your Business Doesn't Last 15 Years F. If Your Business Never Begins 9. The Home Office Deduction A. Qualifying for the Home Office Deduction B. Calculating the Home Office Deduction C. IRS Reporting Requirements D. Audit-Proofing Your Home Office Deduction E. Deducting an Outside Office 10. Car and Local Transportation Expenses A. Deductible Local Transportation Expenses B. The Standard Mileage Rate C. The Actual Expense Method D. Other Local Transportation Expenses E Reporting Transportation Expenses on Your Tax Return 11. Travel Expenses A. What Are Travel Expenses? B. Deductible Travel Expenses C. How Much You Can Deduct D. Maximizing Your Travel Deductions 12. Hiring Help A. Deducting Payments to Workers B. Employees Versus Independent Contractors C. Tax Rules When Hiring Independent Contractors D. Tax Rules for Employees E. Hiring Your Family F. Hiring a Resident Manager 13. Casualty and Theft Losses A. What Is a Casualty? B. Calculating a Casualty Loss Deduction C. Disaster Area Losses D. Casualty Gains E. Tax Reporting and Record Keeping for Casualty Losses 14. Additional Deductions A. Dues and Subscriptions B. Education Expenses C. Gifts D. Insurance for Your Rental Activity E. Legal and Professional Services F. Meals and Entertainment G. Taxes H. Unpaid Rent 15. Vacation Homes A. The Vacation Home Tax Morass B. Regular Rental Property C. Tax-Free Vacation Home D. Vacation Home Used as Rental Property E. Vacation Home Used as Residence F. Calculating Personal and Rental Use G. Converting Your Home to a Rental Property 16. Deducting Rental Losses 17. Record Keeping and Accounting 18. All About Schedule E 19. Claiming Tax Deductions for Prior Years 20. Help Beyond This Book Index

"There should be a law requiring every landlord to read this great book. It simplifies the complicated, makes boring tax laws interesting, and offers landlords the major financial incentive of saving tax dollars.... On my scale of one to 10, this outstanding book rates an off-the-chart 12."

 

"This book cannot be recommended too highly.... explains rental property tax deductions clearly and details how to maximize tax benefits by using 'hidden deductions'..."

 

"Uses many lively examples and charts to make potentially boring topics understandable and interesting."

 

Stephen Fishman, Attorney Stephen Fishman is the author of many Nolo books, most recently Tax Deductions for Professionals. Other titles include Deduct It! Lower Your Small Business Taxes, Every Landlord's Guide to Tax Deductions and Home Business Tax Deductions: Keep What You Earn—plus many other legal and business books. All are published by Nolo. He received his law degree from the University of Southern California in 1979. After stints in government and private practice, he became a full-time legal writer in 1983. Products by Stephen Fishman, Attorney: Choose the Best Legal Entity for Your One-Person Business Consultant & Independent Contractor Agreements The Copyright Handbook: How to Protect & Use Written Works Deduct It! Lower Your Small Business Taxes Every Landlord's Tax Deduction Guide Home Business Tax Deductions: Keep What You Earn How to Safely & Legally Hire Independent Contractors Nondisclosure Agreements: Protect Your Trade Secrets & More The Public Domain: How to Find Copyright-Free Writings, Music, Art & More Web & Software Development: A Legal Guide What Every Inventor Needs to Know About Business & Taxes Working for Yourself: Law & Taxes for Independent Contractors, Freelancers & Consultants Working With Independent Contractors

 

Every Landlord's Tax Deduction Guide by Fishman, Stephen
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