Tax season is knocking on your doorstep, well almost anyways.You can reduce your tax amount by keeping this simple tip in mind.Delay collecting your rent and you can minimize your total taxable income.
Delaying rent collection during the last months of the year may offset rental income and put you at a better tax liability.
The benefit of rental income is that you can report a loss while still making a profit. In a tax year, if rental income exceeds rental expenses, that means you have a profit from rental activity, and you will have to pay an additional tax on it.
To avoid paying taxes on the rental profit, delay rent collection until the next tax year so you don’t have to report the income this year. This is possible because rental income is reported when rent is collected, so if rent wasn’t collected this year, it isn’t reported as income this year. By lowering rental income, you reduce your tax liability. You will still collect your rent, while completely avoiding the tax.
This strategy works really well if you have a lot of expenses the next year (replacing a roof), and high income limitations do not allow you to report a loss. By offsetting rental income in certain years, you can change your taxable liability and save a lot of money.
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