As a new landlord, this is my first time using online software to file taxes on rental income. I have a full-time job (W2) and turned my primary residence into a rental last year. This rental home is located in a separate state.
How may I maximize my rental income deductions to lower my tax liability?
Regards ahead of time.
Remember to account for depreciation. But keep in mind that the value of the land must also be taken into account since it is not depreciable.
You will be responsible for paying most of your additional costs out of pocket (repairs, cleaning, insurance, etc.)
I had a rental for over eight years, and even after all costs—including depreciation—it turned a profit. I had to pay some tax in the end.
What is there to get the most out of? Most likely, that is what it is. As mentioned in the previous comment, depreciation is calculated on the building value only (land excluded) over 27.5 years. If the building is put into service in 2023, you will only receive a portion of the depreciation over that time. You also have to pay for supplies, repairs, utilities, insurance, property taxes, and other costs. Remember that you might need to file in the state where the rental property is located as well as the state in which you reside.
Before I respond, do you anticipate making money on this rental endeavour after depreciation expenses?
Indeed. After depreciation, HOA dues, and any other costs like as taxes, interest, and little repairs, I am in the black. But the profit is quite small—less than $1,000.
Because I am not keeping complete logs and am not spending 250 hours, I most surely do not qualify for safe harbor. Safe harbor is obviously out of the question, but the link makes no mention of how to determine whether a company deduction qualifies.
It states: qualifying business only if it otherwise satisfies the requirements of section 199A deduction and fulfills the definition of a trade or business.
You will not be eligible for the QBI deduction if you do not meet the 250 hour criteria.