The IRS reported that underreporting was mostly linked to understated income, not overstated deductions. The agency also determined that most of understated income was related to business activities, not wages or investment income.

While these figures may appear shocking, they more or less match results found in a 1988 study. The numbers are also artificially inflated by individuals that fail to file returns and pay taxes. The IRS is not expected to take any new course of action based on these results.

3. Paying your accountant and/or lawyer,

4. Mileage for driving to and from property [I said, “No more parties!”]

5. Depreciation of property,

6. Depreciation of items in property such as washing machines, furniture, etc.

Imaginary Rent Deduction

A few creative property owners have suggested that they should be able to deduct their customary and standard monthly rent if property is empty. The argument goes, “If property is empty, I am not making revenue and should be able to deduct $1,500 that I am missing out on.” At first glance, this almost makes sense. Sadly, it doesn’t fly from perspective of IRS. Since you are not receiving revenues, your total revenues for year will be reduced by loss rent. You can’t double dip by deducting $1,500 from already reduced yearly revenues. The only things you can deduct are expenses you incur during this period, and only for so long as you are actively trying to rent place.

Rental properties are a great investment. Even more so if you stay on top of your taxes.