J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return

9.2 Checklist of Rental Deductions

The expenses in this section are deductible from rental income on Schedule E of Form 1040 in determining your profit.

Real estate taxes.

However, special assessments for paving, sewer systems, or other local improvements are not deductible; they are added to the cost of the land. See 16.4 through 16.7 for real estate tax deductions.

Construction period interest and taxes.

These expenses generally have to be capitalized and depreciated (16.4).

Depreciation of a rental building.

You may start claiming depreciation in the month the building is ready for tenants. For example, you bought a house in May 2012 and spent June and July making repairs. The house was ready to rent in August and you began advertising for tenants. On your 2012 return you begin depreciation as of August, even if a tenant did not move in until September or some later month. The month the building is ready for tenants is the month that determines the first-year depreciation write-off under the mid-month convention. See 9.5 for the monthly depreciation rates for residential rental property. Rates for nonresidential buildings are at 42.13.

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Court Decision

Co-Tenant’s Deduction for Real Estate Taxes

The Tax Court may allow a co-tenant to deduct more than his or her proportionate share of real estate taxes. According to the court, the deduction test for real ...