Necessary Tax Documents for Reporting Rental Property Income

As a law abiding property owner, to completely record and report your annual rental property income to the Internal Revenue Service, you will need different Internal Revenue Service tax documents which will be discussed within this brief article. As laid out in this article, the tax documents considered necessary change depending on the particular official business who is the owner of the rental property (individual, partnership, corporation, or LLC). For further information on legal entity rental property ownership, look at the article in this Guide, titled Best Rental Property Ownership.

TIP: Quick note – You can locate the forms described in the following paragraphs on the Internal Revenue Service’s homepage: Each of the necessary documents should be included in any tax preparing computer software, if you use one of them.

Individual Ownership

Which includes joint ownership with a wife or husband, tenancy in common, or shared tenancy with legal rights of survivorship.

Form 1040. All individual people have to file Form 1040, so this is the place you need to get started. Your own net rental property revenue or financial loss subject to taxation will appear on line 17 from the first page in Form 1040. You aren’t able to take advantage of the easy Forms 1040A or 1040-EZ, as a property manager with rental activity.

Schedule E. The addendum to Form 1040 you have to know about is Schedule E. It actually has various uses, however the usage that is meant for you is reporting of leasing profit and expenses. The only element of Schedule E that you have to complete is the segment titled “Part I”. Different essential tips to be aware of: when reporting on a rental you jointly own with a person, who is not your significant other, you just need to report the costs which you sustained and also the profits which you earned. Don’t forget, furthermore, that you will have to keep track of your expenses regarding rental and non-rental use if you’re renting a segment of your own personal residence, or whenever you only leased for part of the entire year. Look at the series of articles called Tax Deductible Rental Property Expenses, contained in this Guide, for more tips.

Form 4562. At line 18 of Schedule E, you are able to deduct the depreciation on the property, which you will use Form 4562 to figure out. For more details, look at the article called, Depreciation Expenses for Rental Property, which is in this Guide.

Partnership/Corporate Ownership

Such as a general or limited partnership, or S corporation.

Form 1065/1120-S. The tax form a collaboration utilizes to report all of its enterprise operations is Form 1065, which you will need to fill out if you have a joint venture. An S corporation uses Form 1120-S to report its business activities. Your total leasing revenue or deficit should be reported on Schedule K, line 2 of Form 1065 or 1120-S (Schedule K is embedded in those forms).

Form 8825. This tax form functions like Schedule E, except that it’s for partnerships and S corporations. Schedule E and Form 8852 are basically similar. Make sure you include whole sums of all profits and operating costs accrued by the partnership or corporation (In the future, they are allocated to each shareholder or business partner).

Schedule K-1. This tax form reports the total leasing income or loss due to each partner or shareholder in line with that business partner or investor’s rental property ownership interest. Each partner receives their own personal K-1 and must report the details of their K-1 on their own Form 1040, Schedule E, Part II.

Limited Liability Company (LLC) Ownership

A single owner LLC is actually a disregarded entity for taxation requirements, which means you can file just like you’re an individual rental property owner (see above). A multiple-member LLC has the option to be taxed as a partnership or as an S corporation (see above).

Seattle Accountant 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.

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