CPA & Business Advisory Blog

Rental 1040

How Individuals Can Take Tax Deductions for Rental Property

Make these elections on your 1040 tax return

If you are the owner of rental property, are you taking full advantage of tax deductions that may be available to you under the tangible property regulations?

Tangible property regulations, issued by the IRS in 2013, address a wide variety of topics, including materials and supplies; repairs and maintenance; capital expenditures; and amounts paid for the acquisition and improvement of tangible property.  It is important for taxpayers to gain some familiarity with the regulations, as we have seen the regulations affect almost all of the taxpayers we work with—from large public companies to individuals who own rental property reported on their 1040 tax forms.

The tangible property regulations allow taxpayers to immediately deduct purchases of tangible property below certain thresholds under the de minimis safe harbor. This is especially helpful to individuals who own rental property and report rental income on their personal income tax return.  For tax years beginning on or after Jan. 1, 2016, the limit is $2,500 and is applied on a per item or per invoice basis.  An annual election must be made each year on your timely filed tax return.

Another election that is beneficial for individuals who report rental property on their 1040 is the small taxpayer safe harbor.  This safe harbor allows taxpayers to immediately deduct improvements made to the property, but the amount cannot exceed the lesser of $10,000 or 2% of the unadjusted basis of the building. To qualify, the taxpayer must have annual business gross receipts of less than $10 million and an eligible building with a cost of $1 million or less. This is also an annual election that must be made on your timely filed tax return.

If you have questions about how to take advantage or deductions for rental property under the tangible property regulations, or would like to learn more about Skoda Minotti’s real estate business advisory services,  contact Denny Murphy at or call us at 440-449-6800.

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