Tax Forms which Will Be Important for Reporting Rental Income and Expenses
As a property manager, to correctly record and report your leasing income to the Revenue Service, you must have different Internal Revenue Service tax documents which will be explained within this brief article. Depending upon the particular authorized organization that manages the property, the tax documents necessitated will vary, as is detailed in the next paragraphs (individual, partnership, corporation, or LLC). View the article titled Best Rental Property Ownership, included with this Guide, for more information about legal entity ownership.
Quick Note: You can find the different documents highlighted here on the IRS’s webpage: http://www.irs.gov/Forms-&-Pubs. If you use tax prep computer software, the application is going to have each of the appropriate documents.
Individual Ownership
This includes shared property ownership with a significant other, tenancy in common, or shared tenancy with legal rights of survivorship.
Form 1040. First, you will have Form 1040, the form submitted by all individual citizens. Your current net rental earnings or financial loss subjected to taxes are on line 17 in the 1st page in Form 1040. You’re not permitted to employ the easy Forms 1040A or 1040-EZ, as a law abiding property owner with leasing activity.
Schedule E. The addendum to Form 1040 you should learn about is Schedule E. Of Schedule E’s many usages, just the use of reporting rental earnings and expenditures is applicable to yourself. The section of Schedule E labeled as “Part I” is the single portion you need to complete. Different relevant notes to be aware of: if reporting on the rental property which you mutually own with anyone, other than your spouse, you will only need to report the expenditures you sustained and the revenue you collected. Remember, also, that you’ll have to allocate expenditures regarding rental and non-rental usage if you are renting a part of your personal property, or whenever you only rented for a portion of the entire year. Find the compilation of articles titled Tax Deductible Rental Property Expenses, contained in this Guide, for more information.
Form 4562. On line 18 of Schedule E, you’ll deduct the depreciation on your property, which you will employ Form 4562 to work out. For further info, see the article called, Depreciation Expenses for Rental Property, which is available in this Guide.
Partnership/Corporate Ownership
Including a general or limited partnership or S corporation.
Form 1065/1120-S. If you’ve got a joint venture, you must use Form 1065, the document a joint venture uses to report all of its enterprise operations. Form 1120-S is used by an S corporation to report enterprise operations. Your net rental property earnings or losses are going to be reported on Schedule K, line 2 of Form 1065 or 1120-S (These forms are incorporated with Schedule K).
Form 8825. Form 8825 is for partnerships and S corporations, and it acts like Schedule E. It is actually fundamentally a lot like Schedule E. Make sure you report full amounts of any earnings and expenditures sustained by the partnership or corporation (Down the road, these are allotted to each shareholder or business partner).
Schedule K-1. The total rental revenue or loss as a result of each investor or business partner is reported by this form, according to the rental property ownership interest of each shareholder or partner. Every business partner will get their own K-1 and has to report the details of that K-1 on her / his Form 1040, Schedule E, Part II.
Limited Liability Co-ownership
You could file like you were an independent owner as, for tax purposes, a single-member LLC is really a disregarded entity (notice above). A multiple-member LLC can decide to be taxed either as a partnership or as an S corporation (notice above).
Redmond CPA+John Huddleston has written extensively on tax related subjects of interest to small business owners. He is a graduate of Washington State University and the University of Washington School of Law.
