Tax Considerations of Rental Properties: Maximizing Depreciation, 199A Eligibility, Elections, and Schedule E

Rental properties are one of the most frequently seen items on taxpayer's returns. They are also one of the most complex. There are many tax issues to consider for taxpayers owning even one rental property. Tax practitioners have new trade or business considerations since the addition of the 20 percent QBI deduction. The IRS issued Revenue Procedure 2019-38 that provides a safe harbor for qualifying for the 199A deduction. The requirements include performing a minimum of 250 hours of rental services and providing a statement with the taxpayer's return.

The character of expenditures and whether they are a betterment, restoration, or adaptation versus deductible repairs significantly affect the current year's taxable income. Some of these costs are currently deductible under de minimis or routine maintenance rules or by making the small business safe harbor election.

There are different depreciation rules for rental properties. Residential rental properties generally do not qualify for Section 179 deductions but can be eligible for bonus depreciation. Tax practitioners need to understand how to maximize expense deductions for roofs, carpets and flooring, qualifying land improvements including fencing and parking lots, and other routine purchases made for rental properties.

Listen as our panel of federal income tax veterans discusses tax-saving elections, the QBI deduction, and passive loss deductions for rental properties.

1. Rental properties: introduction
2. Passive losses
3. Trade or business determination
   1. Defining trade or business
   2. Grouping rules
4. 199A deduction, Revenue Procedure 2019-38 Safe Harbor
5. Depreciation
6. Deductible expenses
7. Elections
8. Filing Schedule E

The panel will review these and other critical issues:

• When are rental properties considered a trade or business?
• Depreciation methods, lives, and deductions for rental property purchases
• Deductible expenses for rental properties that are often overlooked
• Elections that benefit most rental properties
• Passive loss limitations and how these affect rental property income and sales

Learning Objectives

After completing this course, you will be able to:

• Determine when rental properties are considered a trade or business
• Identify deductible expenses for rental properties
• Understand how the passive loss limitations apply and how they affect rental property income
• Differentiate between passive and non-passive losses
• Establish when real estate qualifies for the IRC 199A deduction

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience preparing complex tax forms and schedules, supervising other preparers or accountants. Specific knowledge and understanding of individual income taxation, including itemized deductions, individual income tax credits, net operating loss limitations including carrybacks and carryforwards.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).