Maximizing deductions: the critical role of tax pros in reporting rental property income

While it is not unusual for a tax pro to have clients with rental income, additional complexities arise once the client decides to sell a rental property. These clients can benefit from tax planning to help mitigate the tax impact of selling a rental property.

Below, you’ll find a few of the top questions from a recent webinar on the topic and their accompanying answers. If you choose to attend the on-demand version of this webinar, you’ll have access to the full recording and the entire list of Q&As.   

Q: What does DMSH stand for?
A: It’s an abbreviation for de minimis safe harbor depreciation, also known as the repair regs.

Q: What is an ALTA statement?
A: The American Land Title Association (ALTA) settlement statement is an itemized list of all the fees or charges that the buyer and seller will pay during the settlement portion of a real estate transaction. Everything from the sale price, loan amounts, school taxes and other pertinent information is contained in this document.

Q: How do you allocate a condo or a townhouse that doesn’t include land?
A: First, verify there isn’t any land tied to the condo or townhouse ownership. If there’s no land, allocate the full purchase price to the building.

Q: If the taxpayer decides not to purchase the rental property, how do you treat the inspection costs, travel expenses and forfeited fees they paid?
A: The treatment depends on the entity type. Assuming this is a noncorporate taxpayer, the taxpayer can take a loss for the failed start-up business costs.

To learn more about reporting the sale of a rental property, you can watch our on-demand webinar. NATP members can attend for free, depending on membership level! If you’re not an NATP member and want to learn more, join our completely free 30-day trial at natptax.com/explore.