Owning rental property is a lucrative business that can bring you a substantial income at the end of every month. However, the income you receive from the rentals must be declared on your taxes so that you don’t find yourself at a crossroads with the law. For first-time rental property owners, the tax filing process may be a daunting task. One of the best techniques you can use if you fall under that category is to work with an experienced financial advisor.

What Should You Declare On Your Rental Property Taxes?

It can get overwhelming if it is your first tax season as a landlord. The income you include in your tax filing report depends on the accounting technique that you use. There are two accounting techniques: the cash basis method and the accrual method. If you just own rental properties as a private entity, the cash basis is the ideal accounting method. This is where you tax your income as you receive it and the expenses as they are paid out. So, what do you declare on your rental properties tax?

The rent received as income in that tax year.
The tenants pay the security money. However, this is only possible if the deposit money is used to clear the final rent payment or is deducted partly or fully to cater for any damages caused by the tenant.
Any in-kind payment made by the tenant and the number of months it covers.
Any payment made by the tenant to get out of a lease.
Any amount paid by the tenant to cover building expenses, repairs, and utilities that are not listed in the lease agreement. When the tenant deducts this money from their rent, it counts as income for you, and you must declare it when filing the rental property taxes.

What to Deduct

You can reduce your tax liability as a landlord by making deductions, such as:

The property’s mortgage interest
Depreciation
Repairs
Operating expenses
Property taxes

However, you cannot deduct renovation, remodeling, and improvement costs. Unless you are a first-time landlord, filing taxes for your rental properties should not be complicated. If you feel overwhelmed, contact Increase Lending today to get all the financial help and advice you may need.