Hello.
I'm planning to buy a house later this year and rent out the apartment I'm currently residing in.
Questions:
1. What expenses can be claimed as tax deductions on my tax return?
2. Does that mean I have to choose itemized deduction instead of standard deduction?
3. Any advice can you give me in the process of purchasing and renting to reduce tax?
Thank you.
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Hello!
1. What expenses can be claimed as tax deductions on my tax return?
If you itemize, you can claim the property taxes and mortgage interest from your primary (and a secondary) residence. On your rental you will report all income and expenses.
2. Does that mean I have to choose itemized deduction instead of standard deduction?
No. Your itemized/standard deduction is separate from your rental income and expenses. If your property taxes + mortgage interest + medical expenses + charitable donations are more than the standard deduction, you can itemize. If they are less than the standard deduction, you can take the standard deduction. Either way you will report your rental income and expenses.
3. Any advice can you give me in the process of purchasing and renting to reduce tax?
Track all income and expenses. TurboTax does a great job walking you through the rental income and expenses but in the first year, you may want to pay for TurboTax Live so you can call in and have an expert just go over the rental property to make sure it is set up correctly. As far as standard rental expenses, here's a list but it is not all inclusive and many may not apply to your situation. The bold ones are almost always included on rental property:
Hi there,
Thanks for your question. Your rental will eventually go onto your tax return on Schedule E. You will want to track all your income and expenses associated with the apartment. This could include utilities, internet, repairs, supplies, furniture (if any) property taxes, and really anything you can think of you spend to rent out the apartment. This will not affect whether you use the standard deduction or itemize, however your mortgage interest on the new home could affect this. Here is a good sample list of expenses Rental Expenses Keep in mind if you spend money on the rental, it is likely an expense you will want to track.
Separate from the apartment, when you purchase a home make sure you keep the closing documents. You will need this when you sell the house in the future. I can't tell you how many times I find someone who doesn't keep their records not realizing you need it if/when you ever sell the house. I hope this helps.
Hello!
1. What expenses can be claimed as tax deductions on my tax return?
If you itemize, you can claim the property taxes and mortgage interest from your primary (and a secondary) residence. On your rental you will report all income and expenses.
2. Does that mean I have to choose itemized deduction instead of standard deduction?
No. Your itemized/standard deduction is separate from your rental income and expenses. If your property taxes + mortgage interest + medical expenses + charitable donations are more than the standard deduction, you can itemize. If they are less than the standard deduction, you can take the standard deduction. Either way you will report your rental income and expenses.
3. Any advice can you give me in the process of purchasing and renting to reduce tax?
Track all income and expenses. TurboTax does a great job walking you through the rental income and expenses but in the first year, you may want to pay for TurboTax Live so you can call in and have an expert just go over the rental property to make sure it is set up correctly. As far as standard rental expenses, here's a list but it is not all inclusive and many may not apply to your situation. The bold ones are almost always included on rental property:
Thank you!
I'm single and live in NYC. The 2021 standard deduction for single was $12,550. For example, my property tax from two properties is $9,500 and mortgage interest is $6,000. Most likely I should choose to itemize, is that right?
Hi there,
Most likely you will itemize. When you prepare your return in TurboTax, the program will compare itemizing to the standard deduction to see which is the higher benefit to you.
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