Ask the Editor: Reader Questions, March 21 — Tax Deductions

Each week, in our new Ask the Editor series, Joy Taylor, The Kiplinger Tax Letter Editor, answers questions on topics submitted by readers. This week, since we are in the middle of tax filing season, she’s looking at questions on the topic of reporting income and deductions on the 2024 Form 1040. (Get a free issue of The Kiplinger Tax Letter or subscribe.)

Q1: Residential Rental Property

I own a residential rental property. In 2024, I fully replaced the roof by putting a brand-new roof on the building. Can I deduct the entire cost of the new roof on my 2024 tax return?
No. For tax purposes, the new roof is treated as an improvement to the rental property and is treated separately for depreciation purposes. According to IRS Publication 527, “[t]he property class and recovery period of the addition or improvement are the ones that would apply to the original property if you had placed it in service at the same time as the addition or improvement.” That means the roof is depreciated over 27.5 years, the same as residential rental property. The beginning depreciation period would be the month/year (2024) that you had the new roof installed.
— Joy Taylor, Editor The Kiplinger Tax Letter

Q2: Form 1099-K

I received Form 1099-K for payments made by my clients through Square. The same clients also sent Forms 1099 to me for those same amounts. How do I handle this when filling out my 2024 Form 1040?

Third-party settlement networks, such as PayPal, Venmo and Square, must send 1099-Ks to payees who were paid more than $5,000 in 2024 (the dollar threshold for 2025 1099-Ks is $2,500.) This is a change from prior years, which required 1099-K reporting only for payees with over 200 transactions, who were paid more than $20,000. The IRS has information on its website about what you should do when you receive an incorrect Form 1099-K. Find out more about this on the IRS website. The IRS link might be helpful, but in your case, the 1099-K from Square might be correct, and there was just double reporting of the income to the IRS resulting from the client also sending you the Form 1099. This seems to be a common problem.

If I were you, I would report all your income correctly on the appropriate schedule of your Form 1040 (likely Schedule C), making sure not to count the same income twice. So if the 1099 and 1099-K reflect duplicate income, only report that income once. And keep good records just in case you hear from the IRS.
— Joy Taylor, Editor The Kiplinger Tax Letter

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Q3: Deductions for Disaster Losses

I am a Florida resident, and my property was damaged in a 2024 hurricane. Can I get a tax write-off on my 2024 Form 1040?

Personal casualty losses can be deducted to the extent the losses are attributable to federally declared disasters, such as hurricanes, earthquakes, wildfires, blizzards or flooding, that affect a wide area. Individuals can deduct personal losses on their Form 1040 to the extent not reimbursed by insurance. Your loss is equal to the smaller of the damaged property’s adjusted basis or decline in value, less any insurance proceeds you received or expect to receive.

Legislation passed by Congress last year has tax easings similar to those given to victims of federally declared disasters in 2018-2020. The relief generally applies to disasters that took place in 2021-2024. This would include hurricane damage suffered by Florida residents. The law lets individuals deduct personal disaster losses even if they don’t itemize on Schedule A. They can write off uninsured personal losses in excess of a $500 threshold without regard to the 10%-of-adjusted-gross-income offset that generally applies to disaster loss deductions. This net loss is treated as an additional standard deduction for nonitemizers.

Here’s how you would report the loss on your return. Use Form 4684 to calculate the loss. Follow the instructions to Form 4684 for reporting a “qualified disaster loss.” Then transfer the disaster loss amount from 4684 to Schedule A, line 16, and write “Net Qualified Disaster Loss” on the dotted line. If you are not itemizing, then you would also put your regular standard deduction on line 16 of Schedule A and write next to it "Standard Deduction Claimed With Qualified Disaster Loss." You then combine these two amounts and transfer the total to Form 1040, line 12. If you are itemizing, follow the Form 4684 instructions for lines 11 and 15. Note that if you are using tax software, then the software should do this for you, once you let it know that you have a qualified disaster loss.

I wrote an online story on this subject. Read more about how tax laws can help victims of Florida hurricanes and other disasters and the ability to deduct disaster losses on the immediate prior-year return.
— Joy Taylor, Editor The Kiplinger Tax Letter

Q4: QCDs

I made a qualified charitable distribution (QCD) from my traditional IRA last year, and the Form 1099-R that I received shows only the total distribution and not that it is a QCD. Why is that, and how do I report the QCD on my 2024 Form 1040?

Individuals 70½ and older could transfer up to $105,000 in 2024 from a traditional IRA directly to charity (the maximum amount is $108,000 for 2025). These charitable gifts can count as all or part of your required minimum distribution. But you’re not taxed on them, and they’re not added to your adjusted gross income.

As you noted, the 2024 Form 1099-R that you received this year doesn’t reflect the QCD. It shows only the total distribution because IRA custodians lack firsthand knowledge to discern whether a particular payout from a traditional IRA meets the QCD rules. When filling out your 2024 Form 1040, include on line 4a the total amount of distributions reported on Form 1099-R. Then you subtract the amount that was transferred directly to charity in the QCD and report the remainder (even if it’s $0) on line 4b. Write “QCD” next to line 4b so that the IRS knows why the numbers don’t match. If using tax software, a drop-down box for line 4b should give you a choice to click QCD.

Similar rules apply to tax-free rollovers from IRAs. Again, the 1099-R will show the figure rolled over from the IRA as part of total distributions. On your 1040, include the full distribution amount on the 1099-R on line 4a. Subtract the rollover and report the remainder, if any, on line 4b. Write “Rollover” next to line 4b.
— Joy Taylor, Editor The Kiplinger Tax Letter

More on Ask the Editor

We have already received many questions from readers, on topics such as withholding income tax from Social Security benefits, filling out a gift tax return on Form 709, qualified charitable distributions and state tax credits, and tax return filing dates. We’ll answer some of these in a future Ask the Editor round-up. So keep those questions coming!

Subscribers of The Kiplinger Tax Letter can ask Joy questions about a tax topic. You'll find full details of how to submit questions in The Kiplinger Tax Letter. (Get a free issue of The Kiplinger Tax Letter or subscribe).