When You Should Use The Federal Tax Form 1040
Some of the confusion about taxes come from the multiple forms the taxpayer has to wade through before deciding which form is right for their income tax return. Most people need the standard Federal tax form 1040 which covers common income and deductions fields. On the other hand, if you have low income for the year, you may use the 1040 ez form. Of course, using either form does not mean smooth sailing. Once you have decided on a form, you then have to know which boxes or fields to fill out. No one fills in every box and most people only need a few fields. But that is the catch: you first need to know the form, then know the fields. That leaves little time for you to know thyself.
The article below may help you to tackle your income tax returns with confidence, so you can have more time for yourself.
Seven Tax Tips For Landlords
If you rent out your Property, you can receive rent from the tenants. In addition to rent, there are many tax breaks available from the government. In fact one of the important reasons for investment in property can be to avail those lucrative tax breaks. Here are seven important tips for the landlords.
1. Claim interest on your credit cards
When you provide services for the tenants, it is possible that you use your credit card to pay for the services. The credit card company charges interest for those expenses. You are entitled to claim such interest as your deductible expense.
2. Claim your local traveling expenses
When you drive down to your rental building to attend to a complaint of a tenant, or when you go for purchasing some goods for repair of your property, the expenses you incur towards travel can be claimed as your deduction from rental income.
If you drive a car or a pickup truck or a similar vehicle, you can claim that deduction by one of the two methods -
- Claiming your actual expenses like gasoline, repairers for your vehicle etc. Or
- Use a standard rate of 58.5¢ per mile for travel after July 1, 2008 or 50.5¢ for the travel between January 1, 2008 and June 30, 2008.
For claiming standard mileage rate, the method should be used from the year when you first used your vehicle for your business activity. If you have already claimed depreciation in the prior years as a business expense, you cannot claim standard mileage rate for this year.
3. Claim the expenses of your home office
Most landlords prefer to keep their home as their office. You can deduct your home office expenses from your taxable income. Remember, you can claim expenses proportionate to the space you have devoted for office work. If you use a workshop, the expenses of such workshop can be claimed as your deduction.
4. Claim your casualty and theft losses
It is possible that your rental property may be damaged or destroyed in an event like fire or flood. In that case you are able to claim a deduction for your loss. This loss is called casualty loss. You may not be able to deduct the entire cost of your property which is damaged or destroyed. You need to take into account the insurance coverage and the exact nature of damage before claiming such a deduction.
5. Claim your long distance travel
If you have to travel overnight for your landlord business, you can deduct the air fare, hotel bills, expenses towards meals and other related expenses. If you plan your business travel carefully, you may be able to mix your business with pleasure.
Remember to keep proper documentation and notes in your diary detailing the purpose of your visit and the expenses. IRS auditors always tend to scrutinize such expenses.
6. Plan carefully the expenses for improvement in your rental property
Generally you’re not allowed to deduct the cost of improvements in one year. You need to recover such cost by taking depreciation, where you recover such cost over 27.5 years. However, many expenses can be classified as repairs, which can be claimed in the first year itself. You need to keep all the relevant documentation and make necessary notes in your diary in order to claim such expenses in the year in which they are incurred. IRS says that when you do a work to keep the property in good condition, it is considered as a repair and not an improvement.
7. Avoid renting the property to your family or friends
People who try to rent their property to family or friends are liable to lose all their deductions due to strict IRS provisions. So if you wish to allow the use of your property to your family or friends, be prepared to go without many deductions. Actually, it would be a better policy to arrange hotel for such people if their use is casual or occasional.
There are all sorts of financial decisions you take in your life. You make gifts to your children; you make investments and acquire real estate. Do you really know the tax implications of these decisions, which can save you thousands of dollars?
Stop donating your money to IRS is an e-book on these little known tax secrets. It is written by Chintamani Abhyankar, a tax professional for last 25 years. Get the expert advice.
The IRS introduced the 1040 ez form to simplify filing income tax returns. Is this your experience?
Originally posted 2009-02-08 11:08:10. Republished by Old Post Promoter
