Sales Taxes

Sales taxes paid on supplies or services related to your rental activity are usually deductible when paid.

Sales tax paid on long-life assets like appliances or furnishings are not deductible. Instead, the expense must be added to the cost of the property, and is recovered either through depreciation or upon selling the property.

Don’t get this confused with deductible sales taxes on Schedule A (Itemized Deductions). On this form, you have the choice of deducting state & local income taxes or sales tax (great for states that don’t have income tax).

Be careful not mix the two, since you cannot take an itemized deduction for sales tax paid on items used in your trade or business.

So keep a tab on sales taxes you’ve paid for your rental activity. Just be sure not to make the mistake of deducting them on your Schedule A.

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This entry was posted on Tuesday, June 2nd, 2009 at 12:33 pm and is filed under Schedule E. You can follow any responses to this entry through the RSS 2.0 feed.