Rental Property Tax Deductions

The deduction for rental property for a landlord is possible on certain grounds, however the total amount is restricted. In case of tenement, this becomes possible only when the rental property is used for residence as well as business purposes. In case of several complex inclusions in your income tax return, to determine the exact value of the deductible amount, you will require a rental property tax deduction calculator, or a form plus guidelines by the Internal Revenue Service (IRS).

Tax Deductions for Rental Property in 2010

Here are some guidelines for landlords, regarding the deductions that they can avail in the 2010 year's income tax return.

Note: From the administrative prospect, the IRS distinguishes between a passive investor and a real estate professional. In case of real estate professional, who (IRS defined) spends half or more than half of his or her time in the real estate business. A person not qualifying this condition is a passive investor. Full-time investors have the freedom of deducting almost all losses, whereas, in passive income cases, $25,000 is the limit. Please check your Modified Adjusted Gross Income (MAGI), if your income is between $100,000 and $150,000, the deduction phases out.

Income and Deductions for Landlord
The following is a list of deductions that you can avail, while filling out your returns:

• Among all rental property tax deductions, depreciation of rental property is the most important one and also the most common one. The depreciation deduction is applicable as per prescribed rates for your locality, and is deducted from the total cost of the asset.
• The second substantial deduction includes, fees and interest on the property. Mortgage loan payments, installments on the real estate loans, have a certain interest charged on them. This may also include, APR and some overhead fees. Such interests are totally deductible. Payable interest, or one that has been reduced or dropped is however not deductible. In fact, any kind of debt forgiveness is treated as an income.
• The cost or repair and replacement also is fully deductible, though home improvement cost is not, and it is added to the original cost of real estate.
• Theft, casualty and any substantial damage is deductible to a certain extent and, in accordance with that, the damage inflicted should be reasonable.
• Travel cost for purpose of the rental property is also deductible, on the basis of certain proofs. For this deduction, it is wise to use the mileage rule where the deductions based upon miles of the car is provided.
• Part of property or home itself when used as an office becomes deductible. The only principle rule that is applicable is that the part of the property should be primarily used for a business, where economic interest is engaged and the tax deduction should be ascertained as per the surface area.
• The last deduction that can be used is that of insurance premium that is paid for the property, the insurance can be of any kind ranging from theft, property, title and disaster insurance. In case of remittance or compensation against certain claim affects other deductions.

Aspects such as security deposits, accrued income, have different treatments yet in cases where the income is received from the tenant against any loss, is treated with the loss, such as repairs. There are some property deductions such as vacation rental property tax that are totally deducted, till a certain extent. Also note that property rented to family has implications on deductions.

Income and Deductions for Landlord
From the tenant's perspective, deductions are less, and the treatment of tax is different. The only deduction that is available is the one for business use of the property, partial use for business in cases where the property is a residential property. The rental tax deductions income limit becomes applicable in certain cases, and employers financial aid and certain aid from the government also comes into the picture, the tax implications differ in case of such aids, and the rent becomes deductible. A prominent example is that of grant provided to single parents, especially single moms.

Please note that terms and conditions, laws and IRS guidelines do change from time to time hence, in case of doubt, please confirm with your Form 1040 guidelines and IRS website. The definitions and rules for the rental tax deductions, can be found on the IRS website. The reporting of income and deductions is done in the Schedule E of the Form and the related services, incomes and transactions are provided in the Schedule C.