Tucson Tax Team LLC + 6111 East Grant Road + Tucson, AZ 85712 + (520) 777-7844
Our Responsibilities: Tucson Tax Team will prepare your rental income tax return based on
information you provide.
Your Responsibilities: We recommend that you keep records for all deductions for a minimum of 7
years. Receipts for depreciable assets or improvements should be kept for 10 years after the asset has
been disposed of. Excessive or inappropriate expenses may be disallowed.
Income: The IRS requires you to report all income received in renting your property. This includes
advance rent, payment for cancellation of lease and cash rents in addition to “non-income” sources
such as bartering and cancelled debt. Security deposits are not included in income if they will be
returned to the tenant, but any security deposit not returned is included in income that year.
Expenses: Deductible expenses should be ordinary and necessary. Mortgage interest paid on debt
used to purchase or improve the property may be deducted; interest paid on debt used for other
purposes is not deductible. You may take a mileage deduction for collecting rent, making repairs, or
inspecting the property if you have a mileage log showing the date, destination, and purpose.
Depreciation: The purchase price of the rental is not deductible in the year of purchase; instead, it is
depreciated over a period of time. The depreciation that you deduct each year reduces your cost
basis; this means that when you sell the property, your taxable income increases.
Title: How you hold title to your property may impact taxation upon the death of an owner.
Sale of Property: When you sell your rental property, you may have a gain or a loss on your personal
tax return. If you convert your residence to a rental, it is considered a principal residence until you
have not lived in it 3 of the last 5 years. After those three years, it is no longer eligible for the full
principal residence exclusion; complex tax rules determine gain or loss on the sale of such property.
QBID: The Qualified Business Income Deduction is available for most rental properties. Our current
understanding of this new law is that most rental properties qualify; however, if you take this
deduction and it is later disallowed, Tucson Tax Team is not responsible for any taxes, penalties, or
interest levied as a result of this disallowance.
Signing below acknowledges receipt of this information:
Signature Date
Schedule E Engagement Letter Tax Year 2020
Thank you for using Tucson Tax Team for your tax preparation needs. Clear
communication is key to a successful business relationship. The purpose of this letter is
to ensure we share an understanding of the services we provide.