Depreciation of Rental Properties and Taxes

Our Mesa accounting firm handles business taxes for many people in the real estate industry such as realtors, brokers, property investors, landlords and mortgage companies.  One of the top requested services, besides tax preparation service in real estate,  is helping them determine the most useful real estate tax strategies. Property owners who use their property in the course of their business or to produce income (such as rental property) can take annual tax deductions every year if they meet certain qualifications, effectively recovering some of the cost of owning the property. In tax lingo, this process is referred to as "depreciating" the property.

What qualifies for depreciation?

If you own property, whether or not you still owe money on it, and if you use it in the course of your business or rent it out to others for income, you can take a depreciation deduction on your tax returns, as long as that property is expected to last more than one year but will eventually lose its value over time due to natural causes.

When can property be depreciated?

You can start taking depreciation deductions when your property is "placed into service", which is the date the property was ready and available to be used for your business (or as rental property), whether or not it was idle on that date.

When does it end?

If you reach a point where the depreciation you've taken has reached your total cost basis in the property, you cannot continue depreciating it. This is a little bit nuanced, as that level also includes depreciation that you were allowed to claim in prior years but never did.

If the property is sold, destroyed, abandoned or converted to personal use, you cannot continue taking depreciation deductions. 

Exceptions

Of course, there are exceptions to what can be depreciated. Even if property meets all of the other tests, you cannot take a depreciation deduction for rental property that you bought and then sold in the same tax year. You also cannot depreciate land by itself.

People who own rental property meeting IRS requirements may be eligible to recover the cost of the property over time through depreciation.

To learn more about depreciation or  rental properties tax questions, here are several good examples provided by the IRS. To evaluate how the depreciation rules apply to your business or rental property, contact Sean Core CPA PLLC online today, or call (480) 626-5043.

Depreciation of Rental Properties and Taxes

Our Mesa accounting firm handles business taxes for many people in the real estate industry such as realtors, brokers, property investors, landlords and mortgage companies.  One of the top requested services, besides tax preparation service in real estate,  is helping them determine the most useful real estate tax strategies. Property owners who use their property in the course of their business or to produce income (such as rental property) can take annual tax deductions every year if they meet certain qualifications, effectively recovering some of the cost of owning the property. In tax lingo, this process is referred to as "depreciating" the property.

What qualifies for depreciation?

If you own property, whether or not you still owe money on it, and if you use it in the course of your business or rent it out to others for income, you can take a depreciation deduction on your tax returns, as long as that property is expected to last more than one year but will eventually lose its value over time due to natural causes.

When can property be depreciated?

You can start taking depreciation deductions when your property is "placed into service", which is the date the property was ready and available to be used for your business (or as rental property), whether or not it was idle on that date.

When does it end?

If you reach a point where the depreciation you've taken has reached your total cost basis in the property, you cannot continue depreciating it. This is a little bit nuanced, as that level also includes depreciation that you were allowed to claim in prior years but never did.

If the property is sold, destroyed, abandoned or converted to personal use, you cannot continue taking depreciation deductions. 

Exceptions

Of course, there are exceptions to what can be depreciated. Even if property meets all of the other tests, you cannot take a depreciation deduction for rental property that you bought and then sold in the same tax year. You also cannot depreciate land by itself.

People who own rental property meeting IRS requirements may be eligible to recover the cost of the property over time through depreciation.

To learn more about depreciation or  rental properties tax questions, here are several good examples provided by the IRS. To evaluate how the depreciation rules apply to your business or rental property, contact Sean Core CPA PLLC online today, or call (480) 626-5043.

Why Quality Tax preparation for Small Businesses is so Important

Some small business owners choose to try to handle their own tax preparation and filings. Unfortunately, unless a small business owner is also a tax professional, trying to tackle their own taxes means facing an increased risk of errors that could trigger an audit. Taking a "do-it-yourself" approach can be costly in other ways too, as business owners are potentially leaving money on the table, essentially over-paying the IRS and state of Arizona.

 Small business tax services

Professional tax preparation services for AZ small business owners should be about more than just preparing and filing tax returns. Decisions you make throughout the year can dramatically change your tax liability, for better or worse.

An experienced tax professional adds value by providing guidance about decisions related to payroll, retirement plans, record-keeping, business bookkeeping services, and more.

 

Choosing a tax prepare for your business

There are a lot of tax professionals offering professional services. When you're looking for a professional to handle your small business returns, look for a well-rounded, knowledgeable CPA who has experience working with AZ small businesses. This is critical; as a business owner you need someone who knows the ins and outs of the rules governing taxes and deductions for small businesses, including

• Self-employment taxes
• Rules about taking a deduction for a home office
• Small business retirement plans

Requirements for deducting meals, entertainment, meeting and travel expenses

It is also important to choose a professional who understands how to, and who has experience applying local and state tax rules to your business. For more tips on how to choose a small business tax professional, see this IRS video.

When it comes to taxes, what you don't know can hurt you. The tax code is complex; most small business owners have enough on their plates without expending the time and energy to try to figure out all of the nuances of the laws. To learn more about the small business tax preparation services offered by Sean Core CPA PLLC, contact our Mesa CPA office online today or call (480) 626-5043.