Need Tax Help To Eval Deal
I'm evaluating my first deal and I need help in understanding the tax implications of the deal.
1.) The deal is for a rental property.
2.) I currently live in a another rental (i.e. I currently own NOTHING).
What write-offs can I take? How does depreciation work?
Thanks!
-J
You generally must include in your gross income all amounts you receive as rent. Rental income is any payment you receive for the use or occupation of property.
Expenses of renting property can be deducted from your gross rental income. You generally deduct your rental expenses in the year you pay them. IRS Publication 527, Residential Rental Property includes information on the expenses you can deduct.
Report rental income on your return for the year you actually or constructively receive it, if you are a cash basis taxpayer. You are a cash basis taxpayer if you report income in the year you receive it, regardless of when it was earned.
Depreciation is a decrease in the value of a capital asset (a piece of equipment, a building, a vehicle, etc.) over the time that the asset is being used. Events that can cause assets to depreciate include wear and tear, age, deterioration, and obsolescence. You can regain some or all of the cost of certain assets by taking deductions for depreciation.
If property you acquire has a useful life of more than one year, you generally cannot deduct the entire cost as a business expense in the year you acquire it. You must spread the cost over more than one tax year and deduct part of it each year.
Instructions for Form 4562, Depreciation and Amortization will give you more detail with specific examples.
"Instructions for Form 4562, Depreciation and Amortization "
thank you for your response and for this reference.
-J