Real Estate Tax FAQ

July 31, 2020

Generally speaking, you must pay taxes on any property you own. If you’re a new property owner paying real estate taxes for the first time, get answers to common questions to help your efforts. You may want to consult your Los Angeles accounting firm to ensure all forms are error-free. 

Are Deductions Available? 

It is possible to make deductions on real estate taxes; however, like most deductions it is a good idea to itemize them. Itemizing deductions involves listing them individually and subtracting the total from your taxable income. You can also select the standard deduction that decreases taxable income if doing so is in your best interest. In terms of itemizations, your options include your mortgage interest up to $750,000 in principal, and local and state income taxes, including real estate taxes, up to $10,000. 

My Mortgage Company Pays My Taxes. What Do I Do If I Receive A Bill? 

If your mortgage company takes care of your real estate taxes, simply make a copy of the bill and send it to said company. The agency will handle the payment from there; however, contacting the company to make certain they received the bill and will pay it quickly is strongly recommended. 

Do I List Security Deposits As Income If I’m a Landlord?

While you must include advanced rent, or rent you will receive in the tax year, as income, you generally cannot include security deposits. Such deposits get returned to the tenants and therefore do not apply. However, any security deposits you do keep because tenants did not adhere to their rental agreements should be listed as income. Security deposits used as final rent payments also count as income on real estate tax forms. 

What Should I Do About a Vacation Property I Occasionally Rent Out? 

A vacation property you rent on occasion requires dividing expenses according to personal and rental usage. Publication 527 from the IRS explains how to divide expenses in light of personal time on such properties since deducting all of your rental expenses is generally not possible. 
Schedule an appointment with your Encino tax consultants at Wallace & Associates for further assistance with real estate taxes. The accountant service in Los Angeles offers professional tax assistance to individuals and companies alike.