After filing your income tax return, it’s important to keep a few things in mind. You can check on the status of your refund using the “Get Your Refund Status” tool on the IRS website. If you made a mistake or find additional deductions, you generally can file an amended return within three years of filing your original return. Certain records must be kept indefinitely, such as actual tax returns and records related to real estate purchases and improvements, retirement or investment accounts. For tax year 2019 and earlier, most other tax-related records can be disposed of. Contact your accountant if you have any questions about which records to keep and how long you need to keep them.
Renting Your Home
Taxpayers often rent their own home while moving to a new residence, which can carry both tax and economic benefits and pitfalls. When you start renting your home, you’ll need to report rental income on your tax return but you’re also entitled to offsetting the rental income with deductions for expenses such as utilities, operating expenses, maintenance costs and depreciation for the home. However the passive activity loss rules may limit your ability to deduct rental expenses that exceed your rental income based upon your income. If your total income is less than $100,000, the maximum rental loss that can be used to reduce taxable income is $25,000. Between $100,000 and $150,000 the $25,000 allowable loss figure is reduced gradually to zero. Additionally, renting your residence could jeopardize a big tax break when you eventually sell the home. When selling a primary home each taxpayer is entitled to exclude $250,000 ($500,000 for married couples) of the profit from the sale. However, this exclusion is reduced by the amount of depreciation you deducted when renting your home.
Tax Costs of Selling a Business
When selling depreciable property used in a business, there are various tax consequences to consider. The Internal Revenue Code specifies that gains and losses from sales of business assets are netted against each other. If the net result is a gain, it will qualify for long-term capital gain treatment which is subject to lower tax rates. Previously deducted depreciation can limit long-term capital gain treatment. If the net result is a loss, the entire amount is deductible against your other income. Different rules apply based on the type of property, and the tax treatment can be complex.
