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Tax Amendment Rental Property Deductions

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Tax Amendment Rental Property Deductions

Question-And-Answer

Nick M.-

A tax amendment for a rental property is common for missing depreciation expense, association fees, and homeowner’s dues. These are large expenses that could save you thousands in saved taxes.

The most common requests we see for tax amendment rental property requests are due to overlooked:

  • Depreciation expense
  • Association fees
  • Homeowner Dues (HOA fees)
  • Broker Commissions for placing a tenant

These are commonly overlooked expenses that trigger a tax amendment request for rental properties because many tax preparers focus on the mortgage interest, property taxes, repairs, supplies, maintenance, and utilities.

Many tax preparers fail to even ask you if you have those expenses listed above, which is why they are the most commonly overlooked expenses for a rental property. Fortunately, you have three years to amend your return, otherwise, the deduction and savings cannot be recouped.

The depreciation expense can be quite large. The annual depreciation expense deduction is the purchase price of the home divided by 27.5 years. For example, if you purchased your property for $275,000, then the annual depreciation deduction would be $10,000. That’s $275,000 divided by 27.5 years. We’ve seen depreciation deductions missed for multiple years, so the missed tax savings can be significant.

The association fees and homeowners dues (HOA fees) are also fully deductible as rental expenses for your rental property. This is a highly overlooked deduction as not all properties carry this expense and many preparers fail to ask since they may not apply to all properties.

The broker commissions are another highly overlooked rental property deduction which is the commission charged by a broker for placing a tenant.

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