Confused About How Your Rental Property Affects Your Taxes?

Ralph00:00:00

Are you feeling overwhelmed by tax implications of your rental property? Are you worried about potential IRS audits or red flags? Well today, we're entering into the world of rental property taxes. I'm going to provide you with clarity that you need to navigate this complex landscape. We're going to discuss common IRS red flags, I'm going to tell you how to avoid them, and I'm going to provide actionable steps to help you maximize your deductions, minimize your tax liability, and find what we're all looking for. That's that financial peace of mind. So stay tuned today as we answer the question confused about how your rental property affects your taxes?

Podcast Announcer00:00:35

In a world where crushing debt keeps you trapped, where living paycheck to paycheck has become your new normal, and where the dream of retirement seems impossibly out of reach, there's hope. Join financial evangelist Ralph Estep Jr. A man who's walked through the fire of financial failure and emerged stronger on the other side. Welcome to Ask Ralph, the show where real world experience meets biblical truth to break the bondage of financial despair. Get ready to take control of your money, break free from the financial stress and align your resources with God's purpose for your life. This is Ask Ralph with Ralph Estep Jr.

Ralph00:01:17

Welcome everyone and thank you for joining me today. I am Ralph, I am your financial evangelist, and I know your time is valuable. So today's show is going to provide you with some actionable insights to improve your financial situation. So let's get started. Now, if you missed yesterday's show, we discussed self employment taxes and how you can pay less. I covered the importance of understanding those tax obligations, and I gave you some great strategies to reduce your tax burden. So if you missed it, I'm going to encourage you to check it out. You do that for all of our episodes at askralph.com. Well, today's listener question comes to us from Lisa and Lisa writes this. She says, "Hi Ralph, I recently inherited a rental property from my parents, and I am completely lost when it comes to the tax side of things. I've heard about deductions and depreciation, but I'm not sure what I can claim and what I can't. I am really scared of making mistakes and getting into trouble with the IRS. I've been losing sleep over this, and I feel like I'm drowning in paperwork. Can you please help me understand how rental property affects my taxes and guide me through this maze?" Well Lisa, thank you for your question. I can feel the weight of the stress. I can feel that a weight of the anxiety on you. And listen. It's completely normal to feel overwhelmed. I don't know if you just lost your parents. Usually when you inherit something, that means somebody has passed away. So if you have, I want to start by saying, I'm sorry about that. But when you're dealing with something as important and as complex as rental property taxes, you need help. And listen, not everybody does this. Not everybody's involved in rental properties. I'm seeing a lot more people that are doing this, but you have that normal fear. You have that fear of making mistakes and you're worried about that burden of paperwork and that paperwork burden can be paralyzing, but I want you to know this Lisa, right from the start, you are not alone in this. Many people find themselves in this situation and I've personally worked with countless clients who faced similar challenges like you. And I want you to know there is a way to manage this. So today I'm going to break it down for you. I'm going to talk about the basics of rental property taxes. I'm going to talk about some common IRS red flags, and I'm going to give you concrete action steps. That's right, Lisa. I'm going to tell you today exactly how you can get clarity and you can get peace of mind in this. Now, if you've got a question for the show, just like Lisa, you can go to justaskralph.com and put your question there because here's the truth. I love answering your questions. It is truly the central part of what we do here on the show. Well Lisa, let me tell you about a client I have named Timmy. Now, Timmy purchased a rental property. He didn't inherit it like you did. But when he bought this rental property, he had all the best intentions. But when he started to look at this thing, the tax implications became cumbersome and he was constantly worrying about making mistakes and he didn't even know where to start. Now, Timmy had bought a small apartment building. In this apartment building, I don't remember exactly. There was maybe five or six apartments and he was getting regular routine monthly payments. And he knew he had to report the income, but he wasn't really sure what else he had to do. He didn't understand all the other components of that. Timmy struggled keeping track of his expenses. And then all of a sudden, on top of that, he filed his first year tax return. He did the whole do it yourself approach. And about a year later, he gets this notice from the IRS saying, Hey, Timmy, guess what? We found some discrepancies. And when I looked at his return, he made an appointment, came in and sat with me. The central issue for Timmy was his expenses looked unusually high, especially the repair expenses. We're going to talk about that a little bit later in the show. So Timmy was panicked. He had just bought this building. He thought he was doing all the right things. He didn't know what to do. So the best thing he did was he came into me. He sat down with me and we talked about how to do this better. So we sat down together. We went through his records and I started with him just like, I'm going to start with you today, Lisa. We talked about the basics of rental property taxes. We talked about the basics of rental property deductions, and the most important thing I stressed to him was all about record keeping because that's really the big takeaway. I'll cut to the chase right now is make sure you're keeping records. You've got to organize those expenses and keep those records. So in Timmy's case, what we did was we went back, we organized the expenses. I looked at that IRS notice and I prepared a response to the IRS. Now, in the end, I was able to resolve this for Timmy. He received actually ended up receiving a refund because the way he had done his return was actually wrong. So I was able to relieve that stress. And in the end, Timmy was grateful for my help. So Lisa, let's start by understanding what it means with rental property income and expenses, because this really needs to be our starting point. So here's the thing. Any payment received for use or occupation of the property, that's what we're going to call rental income. That's going to be things like the normal monthly rent payments. It's going to be advanced rent payments. Now, let me just take it aside here. This is one of the things I'm often asked by clients or people that send letters into the show is they'll say to me, Hey, Ralph, if somebody pays me six months in advance, or they pay me a year in advance for the rental, do I have to claim that on the taxes in the year in which they pay me? And the answer to that is yes. And it's a real simple reason for that. Taxpayers are on what's called the cash basis. So you don't have to get real fancy tax or accounting lingo. It basically means is when you receive the money, when you got that cash in hand, that's when you claim the income. So if you receive advance rent payments, if somebody wants to pay you six months in advance or three months in advance, whatever that is, that's going to be income when you receive it. In addition to that, maybe you collect payments for canceling a lease. Maybe there's something in the lease agreement that says if they cancel early, they need to pay a fee for that. That's included in rental income. Any expenses paid by the tenant are, and here's one a lot of people don't get. Any property or services that you get in lieu of rent. In other words, if you received something that they, maybe they did repair on the property. Maybe you rent it to a person that's a handyman and this person went in to fix things. So basically, big takeaway here, Lisa. If you received money or you receive some kind of service, you probably need to report that as rental income. So that's the first part of the puzzle. What is the rental income? Let's move on to the second part and that's deductible expenses. Now, I'm going to make a very broad statement and then we're going to pare it down some. In general, the IRS will allow you to take what they call ordinary and necessary expenses. And that's for managing the property, for conserving the property and maintaining the rental property. So these things are things like mortgage interest. Now a lot of people get fouled up here. They'll come in to meet with me and they'll say, Ralph, you know, I've got this rental property and here's what I paid last year in mortgage payments. You can't do that. And I've actually repaired or fixed and amended some tax returns where a taxpayer thought they could just take that whole mortgage payment. It doesn't work that way. What you can take is the interest. And we'll talk about why that's the case in just a little bit and we talk about depreciation. Like I said, I've seen this many times, but you can deduct the mortgage interest. You can also deduct property taxes. You can deduct any operating expenses. That would be things like advertising if you have to go find new tenants, any cleaning and maintenance fees, you can deduct the insurance. You can deduct legal and professional fees. So if you need to hire an attorney to write a lease, or you need to hire somebody like me to keep track of the accounting or do the taxes, you can deduct all those things. If you have a property management company, you can deduct the management fees. You can do any supplies that are used for the property. Maybe you've got to replace toilet seats or curtain rods or anything like that. And the other one that I'm going to mention here is utilities. So if there are any utilities that you have to pay, maybe you're in between tenants and you've got to pick up the cost of the electric bill or the water bill or anything like that. And the final one we're going to talk about here is repairs. Now I'm going to talk about the distinction between improvements and repairs in a few minutes, because that is an area where I see a lot of red flags and people making mistakes. And in the final expense is what we call depreciation. So those are the basics of the income and expenses, Lisa, but it's really not that complicated. So if you think about it, what I've mentioned is the money that's coming into you and the money that's going out. So let's take a minute now and talk about some of the most common mistakes I've seen. And more importantly, I can tell you about the mistakes, but what's important is I want to tell you how to avoid them. So here's what I consider my common mistakes to avoid. Now here's the first one, and this was the problem that Timmy had. And that's not keeping accurate records. Here, Lisa, listen to me on this and everyone else that's tuning in right now. You got to keep thorough and organized records of all your rental income and all those rental expenses. So that will be things like rent receipts, bank statements, invoices, receipts for any expenses whatsoever. So it's all about documenting, documenting, and documenting. The second big one I come across is misclarifying repairs and improvements. So let's park there for a little bit. We need to really understand the distinction between the two. Because this is a huge issue. Now why is this a huge issue? Because the deductibility changes. So repairs are deductible in the year that you incurred them. In other words, if let's say, for example, I mentioned a toilet seat. Okay. So let's say you go in, you replace the toilet seat. And when you notice all of a sudden that there's a crack in the toilet or something like that. So you've got to call in a plumber to fix or repair that toilet. That is a repair. Now, improvements are something totally different. Improvements have to be depreciated over their useful life. You can't take a deduction for them in the current year. So let me give you an example. We'll stay in the bathroom for a second. We talked about that repair of that toilet, maybe repairing a sink. But let's say, for example, you're in between tenants and you decide, you know what? This bathroom has not been maintained. It needs to be renovated. That's an improvement. And see, this is a huge issue. And this is something I talk about with clients all the time and understand why that the motivation here. Because repairs are deductible in the year that you do them. In other words, if you spend, let's say $800 to have a plumber come out and do some repairs, that's deductible in the year that you do that. If you in, in the other case, do an improvement, that's deductible over the useful life of the rental property. And if it's a residential rental, that's 27 and a half years. And if it's an investment property, that's even longer. So you really need to understand the difference between improvements and repairs. And this is where I see the IRS auditing people. You'll file your tax return. You'll have that income statement in there for the rental property. And the IRS sees this huge repair cost. It's like, ding, ding, ding. You are now the winner of the audit lottery. So that's something to be intentional with and understand. The third big one is overlooking depreciation. Now, depreciation is the other side that we were a few minutes ago. We talked about, you can't deduct the full mortgage payment. Well, you can deduct the interest, but what you're actually deducting in depreciation is the value of that property over its recovery period. What I mean by that is I mentioned a few minutes ago for a residential rental. That means that the IRS has set this number that, that will be depreciated over 27 and a half years. So if you have a 200, real simple example here, if you have a $270,000 rental property, then you're going to basically have $10,000 in depreciation every year. I hope I did my math right. If not, check me on that, but that's basically what I'm talking about. So that is over its useful life. Now what I have seen is a lot of times clients will try to do the old do it yourself thing. And they miss this altogether. Or for example, they'll put things on depreciation, which are not deductible, like land and all those stories. Again, we'll talk about that in a little bit and here's where the big problem is. It's not a problem for the IRS when you're going through this, because basically you're paying tax that you don't actually have to pay because you're not taking that expense for that repair. But here's the problem. When you go to sell that rental property, the IRS can actually impute what you should have taken in depreciation and make you recapture something that you never got the benefit of. So that is a real big pro tip. Now, the fourth one I see is not taking advantage of all the available deductions. And most of the time, my experience has been people don't do that because they're not keeping track of it. There are a ton of deductions available for rental property owners. I can't go into all of those or we'd spend an hour talking. We mentioned some of those, but make sure you claim all the deductions you're entitled to. And I'll talk about the importance of record keeping a little bit later in the show. Now my fifth one here is failing to report all your rental income. This is one I see routinely. We talked about it. You got to record the monthly rental that you get. If there's any advanced payments, maybe you got some other things. Like maybe there's a repair or maintenance that was included in the rent. You've got to report and listen to me on this. Lisa, hear me loud and clear. You've got to report anything that you received an income that needs to be shown on the tax return. Now last, but certainly not least, and this is the big one. Now this isn't just for rental properties. This is for businesses in general. It's what we, in the accounting lingo, fancy term is called commingling. And basically what I mean here is mixing personal and rental finances. I see this all the time. I'm going to talk to you in a minute about how to avoid that. But you've got to keep your personal and your rental finances separate to avoid any confusion and potential problems with the IRS, because here's the deal. The IRS will not allow you to put the two things together. And what I see so many times, a taxpayer will come in and I'll say to him, okay, what did you collect in rent last year? Well, I'm not really sure because I get those checks and I just deposit it to my personal account or they get a Venmo or they get a cash app or whatever those things are. So here's a pro tip. Here's a big takeaway from today. If you don't hear anything else I say, keep a separate bank account and, or a separate credit card for your rental properties, because here's the deal. I got many clients that I've convinced to do that. It makes it so much easier to handle your tax preparation, your tax planning, and your financial management, because everything goes through that. If you get audited, you can say to the auditor, here is the checking account for the rental property. It will show all the deposits. Well, that's rental income. It'll show all the expenses. Those are your deductions. It makes life so much easier. So if you're going to have a rental property and Lisa, you've got one now, you want to keep track of these things separate. So get a separate bank account and get a separate credit card if you're using credit card. So that's the most common mistakes I see Lisa, but now let's talk about some red flags because here's a deal Lisa. You mentioned this in your letter. You don't want to have problems with the IRS. You don't want to set off those red flags. I know I certainly don't. One of the big red flags. It's what got Timmy in trouble is large or unexplained deductions. If you claim something unusually large compared to your rental income, deductions that seem out of proportion to your reported income. So for example, here's the Timmy situation. Timmy, if I recall correctly, it's been a few years, collected about $12,000 in rent for this rental property. Now he had multiple units, but as a particular, this one particular unit, $12,000, it was a thousand dollars a month. Real simple math. But then he had this like $22,000 repair expense. And again, it doesn't take a rocket scientist to figure out. The IRS look, this is, wait a second. You only collected $12,000 in income, and here you are taking a $22,000 repair expense. Now in Timmy's case, that should have been listed as an improvement. Then he would have been able to depreciate that over its useful life. So watch out for those. It could be unusually large deductions that could be too much in repairs and maintenance. It could be management fees that don't make sense. It could be all those types of things, utilities, any of those things. Another big one is inconsistent reporting. This is one of the things I say to taxpayers and people I counsel financially every day. Be consistent. You got to look for those discrepancies between your reported income and the expense of your claim. If you, if you're inconsistent about it, year after year, and you don't have an explanation, the IRS is going to look at it like you're on a rollercoaster and they're going to ask questions. It's going to trigger audits and you don't want that. Now here's another one a lot of people don't think about. If you accept payments, we talked a little while ago about that person is getting them to their personal account. Well, so many people are doing those things electronically. So now on those electronic platforms, at the end of the year, just like if you had a side gig or side hustle, they're going to issue you a 1099K. So here's another pro tip. The numbers on that 1099K, they better match what's on your tax return. A lot of people don't think about that. They're like, Oh, you know, they just, they pay me through the cash app, Ralph. I don't have to report that. Well, guess what? You do have to report it. And the person that is running the other side of that, that cash app or Venmo or whatever those things are is likely sending that 1099K form to the IRS, which leads me to the next big red flag. And that's failure to report all your rental income. This is one that I see routinely, many times is because they don't report non cash payments, or I've got clients that are just brazen. They say to me, Ralph, they pay me cash so I just don't report it when they pay me cash. Or, and this is one is often overlooked. If they do services, if they make repairs to the rental property in lieu of rent. Now, you might be saying, Ralph, wait a second. I didn't get any money for that. But the IRS actually taxes you on what's called economic benefit. So if you had somebody in your rental property, let's say you had a contractor in there. A great example. Let's say you have a single family home as a rental, and you've got a contractor in there that does HVAC work. And all of a sudden the air conditioner dies and you say to the tenant, listen, I know you do this kind of work. Would you fix this for me? Sure. I can do that. And I'll just knock it off the rent. Well, guess what? That is economic benefit to you so you've got to report that. And another thing you got to look at under reporting rental income to compare to what is reported by your tenants or through other sources that will get you in trouble as well. Now you might be saying, well, how would they know? First of all, if they get the 1099K, that's tip number one. But secondly, sometimes the tenant will have a small business in the rent or something like that. So it's being reported. So the IRS could go dig in and say, well, we see that you're renting this property, Ralph, and we got this client or this person, this tenant who's claiming a deduction for it. But then we looked at your return and there's nothing on it. So listen to me, hear me on this. Report all your rental income. Another big one is improper classification of expenses. One of the things I see routinely on this one is that you got to be careful not to mix those personal and those rental property expenses. I've seen it time and time again, where a client will be out at the Home Depot or some other fix it store, and they need to buy something for the rental property. Maybe there was a repair maintenance and it's like, well, I'm here. I got to pick up something for the house as well. Then all of a sudden fast forward, they get audited. The IRS agent says, let me see the receipts for these particular transactions. And then they see something like a snack or lunch or something like that on the receipt. And here you are, you took it as a deduction on the rental property. As we talked about, make sure you're categorizing those improvements and repairs. That is a huge one. This is one I get asked all the time. The next one I want to talk about is one of the things I get asked all the time about as well, at least, and you might be thinking about this one too. What happens if somebody doesn't pay me? I've had new clients come in and they give me their list of income and expenses for the rental property. And I get to it and they say, well, here's an expense called lost rent. I said, okay, explain this to me. Well, they said, Ralph, listen, now for the months of January, February, and March, we had nobody in the rental. So I lost rent those months. Well, here's a problem. You can't deduct lost rent. I see that on tax returns that I correct. I see that on tax returns that I have to amend. So just understand, you cannot deduct lost rent. Now you could technically do this. You could say, well, I collected rent but I didn't actually collect it. So, but it's a wash if you think about it. So just remember, you cannot deduct lost rent. Another big red flag is excessive depreciation claims. I see this sometimes when people do their own taxes and they set up the rental property, and maybe there's a couple of acres of land with it. So when they put this depreciable asset in, they not only put the value of the quote home or the building, they also put the price of the land. You can't do that. You cannot depreciate land. So you've got to, at the front end, make a determination. What is the building value and what is the land value? Sometimes I'll see people even pick the wrong depreciable life. And again, this gets into the weeds. This is where you need to make sure that you're either following the IRS guidelines. And like I said, for a residential rental, that's 27 and a half years, but maybe you have other things. There are different useful lives. There are different depreciation periods for those. So this is where I'm going to say it's important not to mix these up. And I dare say it's time to find some, a professional to help you. Now, one of the other big red flags is unusual or frequent losses. If you constantly report rental losses on a rental property, especially if it's a pattern over multiple years, claiming those losses that seem disproportionate to the property's income potential can land you in trouble. The IRS isn't dumb. They're going to look and see in this particular area, how much is a reasonable rent. If they see that you're collecting no rent, or if they see that you're collecting half of the rent you should be collecting, they're going to start asking questions and you can avoid that by making sure that you're not trying to play games, that you're not trying to not report all of those losses. And here we go again, another big one. This is the biggest red flag, and that is inadequate record keeping. If you don't have detailed records to support all your claims and deductible expenses, here's the deal. When you file your tax return, the IRS assumes, and this is a big assumption, but this is what the code says. They assume that you've got every receipt ready to justify that tax return the moment that you send it in, the moment you hit submit. And if they find inconsistencies, this is where they will audit you and they will ravage you. They will, they'll remove deductions. They'll do all kinds of things and cause you all kinds of pain. And like we said at the beginning, nobody wants to get into pain with the IRS. Here's another one that I see sometimes, and that's mixed use of property. You might be saying, Ralph, what are you talking about that? Here's where you might have a situation where you're claiming the property both as a personal residence and a rental property, but you haven't really thought that through. You haven't documented that. I see this sometimes if a person has a duplex, you know, right side of the house, left side of the house, or maybe they have an apartment as part of their house and they're taken the whole mortgage interest deduction. They're taking all the utility costs. They're taking all the repairs and maintenance, but you can't do that. You've got to make sure that you're allocating that based on what was the rental portion and what was the personal portion. I see people try that game and it's just an apposite for disaster. And it's going to get them in trouble with the IRS. Another one I see is high mortgage interest deductions. Again, you've got to look and see, does the mortgage interest compare to the value of the property? Now, one of the things I see in this area, you might be saying, well, Ralph, wait a minute. Why, why would a lender lend money on a property that's not worth what it's on? Well, here's the issue. A lot of people have gone out and gotten equity loans on their property. So maybe they could buy another property. Maybe they could do some home improvements at their own home. This happens all the time where the IRS will not allow you to deduct the interest if that interest isn't being used for the rental property, for purchase of the rental property, for improvements to the rental property. If you're using it for something else, then technically you can't deduct that mortgage interest. So that's another big red flag. Another one I see is unusual travel and entertainment expenses. See, here's the thing. You can deduct the cost of traveling and checking on your rental property, but they got to be documented and they got to be justified. Let me tell you a crazy story. I had a client once. He had a rental vacation property. As I remember, it was in Florida. And he said to me, he says, Ralph, here's the deal. I've got to go every month. I got to get on an airplane. I've got to go stay in a hotel and I've got to check on my rental property. That may very well be true, but when you have so much in travel expenses, it is going to raise a red flag. And here's why I was so concerned about in his case. Think about this for a second. He actually was paying a management company to manage the property for him. So on his tax return, you see a management fee and it was not cheap. I think it was like 500 bucks a month or something like that. And in addition to that, he's saying to me, yeah, but I want to put a travel expenses on our side. This makes no sense my friend. The IRS agent is going to say, well, if you have a management company, why are you going there once a month? We don't buy it. Like I said, on the show a few times, if you can't prove it to your grandmother, you better not deduct it. Another one I see is excessive repair and maintenance costs. If you've got, and this is what got Timmy in trouble. If you're claiming high repair and maintenance costs again, without documentation, that is a huge issue. And as we talked about a little while ago, make sureyou're distinguishing repairs and improvements because those improvements cannot be, and I argue with clients sometimes. They'll come down and sit in front of me and they'll say, Ralph, here's all my repairs. And I go, wait a minute. I said, your rental income was like $25,000 for the year. And you're telling me you had $20,000 repairs. You got to explain that to me. Now, I'm going to be honest with you. Sometimes that can happen. Maybe you had a flood, maybe you had some kind of major, maybe there's a fire or something like that. Then that makes sense. Well, you're going to have documentation. And I always say to clients, when you've got a situation like that, have that documentation ready to go, have pictures, have insurance, have all of those things ready to go, because what you probably should be doing for many of those things is depriciating that over. And I'm going to spend a lot more time talking about this, but sometimes I've seen clients set up pass through entities like LLCs or corporations to do this income from the rental property to try to avoid something. I'm not going to get into the discussion today, but there's a whole issue with if you have rental losses in your incomes over a certain amount, but I've seen this as a red flag. I've seen, you know, some of these clowns online doing these, these aggressive tax planning strategies where they're saying, you know, rent your home to your neighbor or rent your home to somebody. You can still live there, but this doesn't make any sense from tax law. So that is really something you got to be careful of because these are things that the IRS is going to be watching out for. Now, here's what, while I was preparing for the episode. This is a great one and I've only seen this a couple of times. Sometimes I have a client to come in and say, Ralph, listen, I need to have an office in my home to manage the rental property. Well, that's fine. If that is the case, but remember what that needs to look like. If you listen to my show, you know I talk about this all the time. It needs to be exclusively used for business. And if you, if you're got rental property over here, and then you've got this huge home office deduction for a room that's not only used for business, that is going to get you in trouble. So now we've talked about the red flags and the common mistakes. Let me now tell you the big part of the show is how you can avoid them. Lisa, because when I looked at your question, you've really had a big, two big components to your question. The first thing was Ralph, I'm overwhelmed. I've never had a rental property. What do I do? And that's why I took a few minutes to explain income part. I explained the expense part, but now, and then I talked about the red flags and the common areas. So now what I want to do is how to avoid those things because that's where I can help you. The number one big tip. If you don't hear anything else I said today. Maintain detailed and organized records of all your income and expenses. Keep those receipts, keep those invoices, keep those bank statements. And it's like we talked about set up that separate bank account, set up that separate credit card and document every single thing that's going on that tax return. If you're working with somebody like me, document it and then give me something that says, here's what came in. Here's what come out, here's the receipts and you're good to go. That's the number one thing. You got to make sure that you have records, make sure you have records for improvements and repairs. Make sure you distinguish in between the two. And you don't have to argue with me, but be prepared to justify that with the IRS. Put some thought into that. And another big thing you want to consider, work with a qualified tax professional, because this is not simple. Lisa, I tried to give you a lot of knowledge today, but to be very candid with you, this is a little bit bigger. In my view, this is not that, do it yourself work over the weekend, tax preparation because the rules for tax reporting, the rules for hand on rental properties, I talked about that passive activity, loss limitation thing. These can get unruly very quick and you can find yourself in trouble. Now bigger than that, working with somebody like me can help you build a tax strategy because this is a great way to break that cycle of living paycheck to paycheck by having passive income. Rental properties are great. You just have to be aware of what you're getting into them. And that means you got to understand the rules. Either stay informed about the current tax laws and regulation related to rental properties, be aware of those or pay somebody, pay somebody like me to understand these things and keep you out of hot water with the IRS. I think that's what you said, Lisa. And that's what we're going to try and do. Okay, Lisa. So here are my action steps for you based on what we talked about today, based on your inherited rental. And don't worry, Lisa, I know you can handle this. So number one thing, keep accurate records. Start by organizing those records. Keep track of your income, keep track of your expenses. I'm going to encourage you maybe get some software, build a spreadsheet, maybe have envelopes with all those types of things. And you want to keep track of all the rental income, keep track of all the rental expenses, have an understanding of your deductions, maybe schedule a consultation with me or somebody else to talk about, Hey, what can I actually deduct for the rental? Sit down with somebody, explain what the rental looks like. Maybe it's a, it's an apartment building. Maybe it's a simple one single house or townhouse. Then it's, you know, you got to familiarize yourself with the deductions available to rental property owners because there are things out there that you can deduct. It doesn't have to be this scary thing. And then at the end of the day, make sure you are taking all the deductions you're entitled to. Don't leave money on the table. If you're feeling overwhelmed, get to in front of a tax professional. Somebody like me can provide you with valuable insights and we can give you guidance to minimize your tax liability. And most importantly, stay compliant with the tax laws. Well, I know we got into the weeds today, but if you want even more information, I've got a daily blog post. I write one of these every day for the show. You can get to it by going to askralphpodcast.com/blog. And that's where I get a little deeper. Believe it or not, there is more deepness to this. I'll give you some resources. I'm going to talk about what I use to create the show today and give you some tools that you can use to make this easier. Now if you found value in today's show, I want to ask you to consider supporting the show. Because your support helps reach more people with a message of hope. Somebody just like Lisa, somebody who's inherited a rental property and they just don't know what to do. Maybe they're struggling with their finances and this show can be a lifeline for them. You can do that by going to askralphpodcast.com/support. And here's a truth. By supporting this show, and hear me on this. You're helping someone who may be facing the very same issues that we're discussing today. So again, please consider supporting this show. You do that by going to askralphpodcast.com/support. All right, so let's do our key takeaways. You probably think I've said these 10 times, but guess what? They're important. So keep accurate records, understand your deductions, consult with a tax professional and be aware of those IRS red flags and take the steps to avoid them. Now, maybe after listening to this, you're saying, Ralph, this is not something I'm signed up for. I do not want to be that do it yourself tax warrior. If you're struggling with tax implications of your rental property, you don't have to walk this path alone. You can book a call with me and I'll help you find success. And I'll help you find peace in dealing with this financial situation. We'll work together to create an individualized plan tailored to your needs. And you can do that by simply going to askralph.com. When you get there, you'll see a button at the top of the screen that says a book a call with Ralph. And remember, you've got to take the first step. I can't reach out there and grab you, but you can reach out there and grab me. So go to askralph.com and let's get to that financial peace of mind that I can help you get to today. Well as we close today, I just want to share a few quick letters from people who are sending me information about how the show has helped them. This one's the first one says, "Hi Ralph, I just wanted to thank you for your show. I've been struggling with my finances for a long time, but your advice has given me hope and a plan to move forward. Thank you for all that you do." And that was signed Brenda. Well Brenda, thank you. I appreciate the fact that you're getting value from this show. I appreciate the fact that the advice is helping you get a plan and helping you find hope. So thank you so much. And we got this one, "Ralph, your show has been a lifesaver for me. I've been able to make significant improvements in my financial situation thanks for your guidance. Keep up the good work." And that was signed by David. Well David, I'm going to send it right back to you. You keep up the good work. I'm going to do what I can, but David, it comes down to you making an everyday decision to work, to improve your finances. And listen, I want to hear from you. Your letters keep me going and it helps me produce this daily content. If there's something you want to hear about on this show, if the show has helped you, if the show has helped you grow or you've learned something from it, do me a huge favor and send an email to me and just say, Hey, Ralph, here's how the show's impacted me. Or you might say, Hey, Ralph, why don't you talk about this? Or, Hey, Ralph, stop talking about this. My email address is Ralph@AskRalph.com again, that's Ralph@AskRalph.com. Now, tomorrow we're going to be discussing key changes to 401k plans in 2025. Now I'm a little bit late to the game here, but some of these things have changed in 2025 and I want to make sure you understand them. So make sure you join me again tomorrow. It's going to be a great topic. So as I close today, thank you for your time and thank you so much for supporting the show. Remember, my passion is to help you achieve financial success. I want to see you live out your dreams. And I want to see you grow in your faith. And I know together, working together, we can master your finances from a Christian perspective. So as I always end the show, stay financially savvy out there and may God bless you abundantly.

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Thank you for joining us on the Ask Ralph Show. And with a simple click to subscribe, we'll invite you back to our next episode. And remember, financial issues don't have to be complicated. Just ask Ralph. The information contained in this episode of Ask Ralph is based on data available as of the date of its release. Saggio Accounting Plus and Ask Ralph Media, Inc. Is under no obligation to update this content if changes occur.Applying this information to your specific situation requires careful consideration of all facts and circumstances, and any information provided is not to be considered as financial, tax, or legal advice. Please consult your tax advisor or attorney before acting on any material covered.