Tax Forms that Are Needed for Reporting Leasing Income

The following short article is focused on all the Internal Revenue Service tax documents you require as a landlord to be able to thoroughly account for, and report, your rental property profits to the Revenue Service. Based on the particular official entity which manages the rental property, the tax forms called for are different, as detailed directly below (individual, partnership, corporation, or LLC). Read the page called Best Rental Property Ownership, included in this Guide, for additional information concerning legal entity property ownership.

TIP: You can locate the different forms outlined below on the Internal Revenue Service’s website: http://www.irs.gov/Forms-&-Pubs. Each of the needed forms are likely to be provided in any tax preparing software applications, if you’re using one of them.

Individual Ownership

Joint ownership with a husband or wife, mutual tenancy with rights of survivorship, plus tenancy in common will be examples.

Form 1040. All independent tax payers need to fill out Form 1040, which is exactly where you should begin. At line 17 of the first page of Form 1040 is your total rental property profit or deficit, subjected to taxation. You won’t be permitted to use any simple Forms 1040A or 1040-EZ, as a law abiding property manager with rental property activity.

Schedule E. The addendum to Form 1040 you have to learn about is Schedule E. Of its assorted functions, the usage of reporting rental profit and expenditures is applicable to yourself. The element of Schedule E entitled as “Part 1” will be the single portion you need to fill out. A couple of important tips to be aware of: when reporting on the rental property that you mutually own with a person, other than your wife or husband, you will only have to report the expenditures you incurred and also the revenue you earned. Try to remember, additionally, that you will need to distribute expenses concerning rental and non-rental purposes should you be leasing a portion of your personal house, or whenever you only leased for a part of the year. Find the collection of articles entitled Tax Deductible Rental Property Expenses, contained within this Guide, for further advice.

Form 4562. On line 18 of Schedule E, you can deduct the depreciation of your property, which you need to employ Form 4562 to work out. For further info, view the article called, Depreciation Expenses for Rental Property, which is available in this Guide.

Partnership/Corporate Ownership

A general or limited partnership, or S corporation is an example.

Form 1065/1120-S. When you have a partnership, you have to utilize Form 1065, the tax form a joint venture utilizes to report each of its organization operations. An S corporation employs Form 1120-S to report its company activities. Schedule K, line 2 of Form 1065 or 1120-S is where the net leasing financial loss or profits are reported (These documents are incorporated with Schedule K).

Form 8825. Form 8825 is designed for partnerships and S corporations, yet works similar to Schedule E. Schedule E and Form 8852 are in essence similar. Make sure that all revenue and costs sustained by the corporation or partnership are provided in their entire amounts (In the future, these are going to be allocated to each shareholder or partner).

Schedule K-1. The total rental property income or financial loss due to each shareholder or partner is reported by this tax document, in accordance with the rental property ownership interest of the investor or partner. Every business partner should get his or her own personal K-1 and will have to report the details of their K-1 on her or his Form 1040, Schedule E, Part II.

LLC Ownership

A single owner limited liability company is a disregarded entity for taxation objectives, meaning you could file like you’re an individual owner (look above). A multiple-member LLC has the option to be taxed as a partnership or as an S corporation (notice above).

Huddleston 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.