A Tax Deduction for the Loss of a Rental Income
If you have a rental property, you don't need a tenant to claim your tax deductions. In fact, a vacant rental property only means that you likely have no income to report. For a rental property that you still own, the Internal Revenue Service allows you to claim deductions regardless of the vacancy.
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No Deduction for Losing Rental Income
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If this is the first time you don't have any rental income to report, or you don't have income for the entire year, you may feel that you're entitled to a credit or deduction for this loss. However, you don't receive a unique deduction just because you've lost the rental income. The only deductions you're entitled to are the same ones you get if you do have rental income.
When You Can Deduct
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As long as your rental property is available for renters, you the IRS allows you to claim your costs. The costs you can deduct are those for getting the unit in service, maintaining it and managing it. If the property is vacant and not available for renters, you cannot claim the deductions. If you sold the rental property, you can only claim deductions for costs incurred prior to the sale, assuming that the unit was available for renters or was being rented during that period.
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What You Can Deduct
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You can deduct necessary and standard expenses relating to the rental property. For example, you can claim a deduction for yard maintenance but not for putting an extravagant fountain in the yard. Some of the standard costs you can deduct include advertising, utilities, pest control, taxes, trash removal, insurance premiums, condo or homeowner association fees, maintenance, repairs and cleaning. Any property improvements, such as adding a water filtration system, must be depreciated over several years according to the IRS tables. IRS publications 946 and 527 give the specifics on calculating deprecation, based on the items you need to depreciate.
Claiming the Deductions
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To claim the rental property deductions, you must use Schedule E with your Form 1040. Schedule E is the “Supplemental Income and Loss” form. If you have something to depreciate, you must use Form 4562, which is the “Depreciation and Amortization” form. The totals from each form carry over to your Form 1040 and lower your tax obligation.
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