If You Take Standard Deductions Can You Also Take Rental Expenses?
- A standard deduction is an amount by which the IRS permits taxpayers to reduce their taxable income without providing evidence of deductible expenses. The benefit of the standard deduction is it provides a simple method for most people without complex finances to calculate and file their income tax returns. Generally persons claiming the standard deduction only complete a form 1040 or form 1040EZ.
- People with complicated income and expenses may elect to itemize their deductions to maximize their tax savings. To itemize, the taxpayer completes a form 1040 and various IRS schedules listing the type and amount of deduction. As various expenses qualify for different deduction rates and caps, the IRS requires taxpayers to calculate each deductible item separately and be prepared to provide evidence of the expenditure.
- Not all expenses related to renting out property are deductible. For example, monthly mortgage payments on the principle of the property are not deductible, whereas the interest on the mortgage is deductible. Additionally, a landlord may be able to deduct any depreciation on the value of the property in accordance with IRS rules. Other expenses such as maintenance, insurance premiums, accounting and legal fees are also deductible.
- A dwelling qualifies as a rental property so long as it was not used by the owner as his primary home during the year. Recreational vehicles and boats may also qualify as a dwelling for rental deductions if the vehicle has a bedroom, bathroom and kitchen area.