Tax Tips | Rental Property Depreciation

Tax Tips | Rental Property Depreciation

Tax Tips | Rental Property Depreciation

One of the reasons people start becoming entrepreneur is to generate passive income. And, one of the most common passive incomes is rental income. Have you owned a rental property? Here are two tax tips for rental property.

First, tax payer should take the depreciation expense of the rental house. This is because IRS will consider it as taken, and will apply depreciation recapture whenever the property is sold in the future. The depreciation expense generally is one of the biggest expenses, and will help tax payer to offset the rental income.

Second, most tax payers put the cost or adjusted basis of the house when depreciating the property. And, in most cases that is accurate. However, the rule is to take the lower of the fair market value of the property or the adjusted basis whichever is lower at the time the property is put in the market for rental.

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