Rental Expense?

[RitaB]

State Tax on Sch C or Sch E income would be an ordinary and necessary expense of the "business".

Did you READ MY TITLE: "YEAH BUT" ?

From Pub 535:

"State and local income taxes. A corporation or partnership can deduct state and local income taxes imposed on the corporation or partnership as business expenses. An individual can deduct state and local income taxes only as an itemized deduction on Schedule A (Form 1040). However, an individual can deduct a state tax on gross income (as distinguished from net income) directly attributable to a trade or business as a business expense."

I can't believe this topic is not CLOSED...

A tax pro would really support deducting of personal income taxes as a Schedule E business deduction??

FE

I agree. I'm on your side. Hello? Super Mom cannot deduct state income tax on Sch E. I also don't know why my first post didn't catch on:

https://www.irs.gov/taxtopics/tc503.html

I guess I will read it out loud:

Topic 503 - Deductible Taxes

There are four types of deductible nonbusiness taxes:
•State, local, and foreign income taxes
•State and local general sales taxes
•State, local, and foreign real estate taxes, and
•State and local personal property taxes

To be deductible, the tax must be imposed on you and you must have paid it during your tax year. Taxes may be claimed only as an itemized deduction on Form 1040, Schedule A (PDF), Itemized Deductions.

[FEDUKE404]

From Pub 535:

"State and local income taxes. A corporation or partnership can deduct state and local income taxes imposed on the corporation or partnership as business expenses. An individual can deduct state and local income taxes only as an itemized deduction on Schedule A (Form 1040).
However, an individual can deduct a state tax on gross income (as distinguished from net income) directly attributable to a trade or business as a business expense."

I can't believe this topic is not CLOSED.

The original comment was about a person who had a "small amount" of income tax and apparently wanted to deduct that personal income tax as a Schedule E rental expense.

NO. . .NO. . .NO. . .NO !!!

Granted, as you cited, there are legitimate "business taxes" on rental activities which likely can be used to offset business income. But using personal income taxes on a Schedule E? Good grief!

And there was no mention the rental property of the lady was a corporation or partnership, which does fly by somewhat different rules.

A tax pro would really support deducting of personal income taxes as a Schedule E business deduction?? Still SMH on that one. . . . . .

Enough time on this topic. Work to do.

FE

[RitaB]

Yeah, but

From Pub 535:

"State and local income taxes. A corporation or partnership can deduct state and local income taxes imposed on the corporation or partnership as business expenses. An individual can deduct state and local income taxes only as an itemized deduction on Schedule A (Form 1040).
However, an individual can deduct a state tax on gross income (as distinguished from net income) directly attributable to a trade or business as a business expense."

[taxea]

Last time I checked, not as a rental expense or as a Schedule C expense. . .

FE

State Tax on Sch C or Sch E income would be an ordinary and necessary expense of the "business".

[FEDUKE404]

Please clarify

It would be a deduction on Sch A for State income tax paid. If she files a Sch E for her rentals it is a tax paid deduction.

Are you really implying that a person can take their personal income tax paid as an expense deduction to offset gross rental income on a Schedule E ? ?

FE

[FEDUKE404]

Deduction of state taxes

The irs allows a deduction for state taxes paid...does it not?

Last time I checked, not as a rental expense or as a Schedule C expense. . .

FE

[taxea]

Same reason a Self employed individual cannot deduct taxes paid to the IRS. No deduction.

Chris

The irs allows a deduction for state taxes paid...does it not?

[taxea]

It would be a deduction on Sch A for State income tax paid. If she files a Sch E for her rentals it is a tax paid deduction.

[Ken]

Its been a LONG time since I first visited this site, but I have a few minutes before my next client comes in. ANYWAY I just wanted to say I agree with Senior member, State taxes are not an expense on rental property, they would have to be deducted on schedule A as an itemized deduction.Period

[Jiggers]

Surely the time spent to help someone take a $190 deduction to save a few dollars in taxes is going to cost the person more than the tax saved. No?

[Super Mom]

Ok, I will stop beating this one to death!! Just trying to help this elderly lady!! Thanks for all of your help!!

Just grasping at straws to try to help this lady, I get it!!!!

[FEDUKE404]

Shocking

You can't really be serious about trying to deduct personal income taxes as a valid rental property expense?!?

What if the lady had paid a "small amount" of federal taxes. . .would you also try to treat those as an ordinary and necessary business expense?

Good grief.

FE

[Super Mom]

I double checked and there are no adjustments to income on the state return. NC just offers less deduction for 1 standard deduction for filing status, vs standard deduction and personal exemption on Federal.

[Super Mom]

State taxes paid are to be placed on Sched A - Line 5

State tax deductions do not belong on Sched E

Your scenario is unusual, if no Federal Tax from the Sched E, why a State Tax generated on Sched E - I almost never see that --- must be some other income or a depreciation adjustment on Sched E

Sandy

Thanks, I will check to make sure there is not some adjustment. I'm in NC, our state tax is pretty high I think.

[S T]

State taxes paid are to be placed on Sched A - Line 5

State tax deductions do not belong on Sched E

Your scenario is unusual, if no Federal Tax from the Sched E, why a State Tax generated on Sched E - I almost never see that --- must be some other income or a depreciation adjustment on Sched E

Sandy