remodel cost on a rental

saitat · ‎March 9, 2022

When entered the remodel cost on a rental, the tax owe increase instead of decrease, why?

HelenC12 · ‎March 9, 2022

Generally, a rental remodel should be depreciated and not expensed.

One possible reason is that some income-based credits such as the earned income credit will decrease when you enter more rental expenses and decrease your taxable income.

Please note that the law requires you to deduct all allowable expenses and not leave out some to increase your income-based credits. Source: MinhT1

Another area that is affected by the amount of income on your rental property is the Qualified Business Income Deduction (QBI). The Qualified Business Income Deduction takes the qualified income and multiplies the amount by 30%.

As your Rental Income decreases with the additional expenses, the QBI is decreased. As the QBI is decreased your taxable income and income tax amount will increase. The greater the taxes the lower the refund. Source: KurtL1

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