One of the many decisions that taxpayers face each year is whether to itemize their deductions or take the standard deduction when filing their taxes. This decision can have a significant impact on how much you owe or how much you receive in a tax refund. For those who have rental property, the decision to itemize or not can be even more complex. Here are some factors to consider when making this decision.
Factors to consider when deciding whether to itemize if you have rental property:
1.
What is itemizing deductions?
Itemizing deductions involves listing individual deductions on your tax return, such as mortgage interest, property taxes, medical expenses, and charitable contributions, instead of taking the standard deduction set by the IRS.
2.
What is the standard deduction for 2019?
For the 2019 tax year, the standard deduction is $12,200 for single filers, $18,350 for head of household, and $24,400 for married couples filing jointly.
3.
Do rental property expenses qualify for itemized deductions?
Yes, expenses related to your rental property, such as mortgage interest, property taxes, insurance, repairs, utilities, and depreciation, can be included as itemized deductions.
4.
Will itemizing deductions save me more money than taking the standard deduction?
To determine whether itemizing will save you more money, you’ll need to compare the total amount of your eligible deductions to the standard deduction amount for your filing status.
5.
Can I deduct rental losses if I itemize?
Rental losses can only be deducted against rental income, not other forms of income, and are subject to certain limitations, so it’s important to consider this when deciding whether to itemize.
6.
What are the benefits of itemizing deductions for rental property owners?
Itemizing deductions can help rental property owners reduce their taxable income, potentially lowering their tax liability and increasing their tax refund.
7.
What are the drawbacks of itemizing deductions for rental property owners?
Itemizing deductions requires more documentation and record-keeping than taking the standard deduction, which can be time-consuming and complex, especially for those with multiple rental properties.
8.
Do I have to itemize all my deductions if I choose to itemize?
No, you can choose to itemize only the deductions that will result in a lower tax bill, so it’s important to calculate your potential savings before deciding.
9.
Can I deduct home office expenses for my rental property if I itemize?
Yes, as long as you meet the IRS criteria for a home office deduction, you can include related expenses, such as utilities and maintenance, in your itemized deductions.
10.
What happens if I claim more deductions than I’m eligible for when itemizing?
If you claim deductions that you’re not eligible for, you could face penalties, interest, or an audit from the IRS, so it’s important to be accurate and honest when itemizing.
11.
Do I need to keep receipts and documentation for my itemized deductions?
Yes, it’s important to keep thorough records of your expenses and documentation for at least three years in case the IRS requests verification of your deductions.
12.
Should I consult with a tax professional before deciding whether to itemize with rental property?
It’s always a good idea to consult with a tax professional or accountant before making any decisions about itemizing deductions, especially if you have rental property or other complex tax situations. They can provide personalized advice based on your specific financial situation.
In conclusion, the decision to itemize if you have rental property in 2019 depends on your individual circumstances, the amount of eligible deductions you have, and whether itemizing will result in a lower tax bill than taking the standard deduction. Consider the factors mentioned above and consult with a tax professional to make an informed decision.