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2021 Tax Planning Guide
Tax Benefits for Rental Real Estate Investors
Certain interests in rental real estate now qualify for the 20% pass-through income deduction. These enterprises are generally defined as owning real estate for purposes of generating rental income. In order to claim the deduction, you’ll need to meet these requirements:
- Keep separate books showing income and expenses for each rental real estate enterprise.
- Complete 250 hours or more of rental services each year if your rental real estate enterprise is less than four years old. For older enterprises, 250 or more hours of rental services must have been performed in at least three of the past five years. Rental services include advertising the property for rent, collecting rent, and completing routine repairs or maintenance on the property.
- Maintain meticulous records, including time logs for hours of all services performed; description of all services performed; dates on which such services were performed; and who performed the services. Attach this report to your tax return.
The formula to figure out your tax liability with the pass-through income provision is complex, so work with your tax professional, who can help you calculate your pass-through income and its tax.
ENERGY EFFICIENT IMPROVEMENTS
The deduction for making energy-efficient improvements to nonresidential rental property is now permanent.CONTACT US
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