rental property

[tsl90]

We have a small home in OK which is paid for. We hope to begin renting it. I have made improvements over the last few months in order to make it more attractive to prospective tenants.

How is the rent income taxed? Are there steps I can take now to minimize the tax penalty on this income? Can I deduct improvements made to the property over the last few months even though we haven't started renting yet?

Is there any easy to understand reference for these kinds of questions?

Thanks

TL

 

[loku]

REntal property

How is the rent income taxed?
Your rental expenses are subtracted from you rental income and you are taxed on the income or you get to deduct the loss.

Are there steps I can take now to minimize the tax penalty on this income?
Your best way to minimize the tax is to keep track of ALL your expenses in connection with the property, including auto mileage to get there for inspections, etc.

Can I deduct improvements made to the property over the last few months even though we haven't started renting yet?
You can deduct depreciation , which is based on the total cost to you of the property and the improvements that will last for more than one year. You also deduct any maintenance or repairs that will not last longer than a year.

Is there any easy to understand reference for these kinds of questions?
To answer your IRS Publication 527 Residential Rental Property is a very good reference that should answer all your questions and give you everything else you will need to know about this. You can download the Publication for free at <http://www.irs.ustreas.gov/forms_pubs/index.html>

 

[tsl90]

Thanks

I'll look that document over.

TL