Tax Forms which Will Be Mandatory for Reporting Leasing Income and Expenses

As a property manager, to accurately account for and report your own rental property earnings to the Internal Revenue Service, you must have different Internal Revenue Service tax forms which will be outlined inside this brief article. As laid out just below, the tax forms needed will be different, depending on the type of professional business who possesses the property (individual, partnership, corporation, or LLC). For more concerning legal entity rental property ownership, find the article included in this Guide, entitled Best Rental Property Ownership.

TIP: All of the forms discussed here are available on the Revenue Service’s homepage at: http://www.irs.gov/Forms-&-Pubs. The necessary documents will be found in any tax preparing software programs, if you work with one of them.

Individual Ownership

Which includes mutual rental property ownership with a significant other, tenancy in common, or mutual tenancy with right of survivorship.

Form 1040. All independent people have to fill out Form 1040, so this is where you will have to begin. Your own total rental property profit or losses subject to taxes will appear on line 17 of the 1st page of the Form 1040. You’re not permitted to use the simple Forms 1040A or 1040-EZ, as a law abiding property owner with rental property income and expenses.

Schedule E. A certain addendum to Form 1040 that you need to know about is Schedule E. It actually has several usages, however the use that is meant for you is reporting of rental property earnings and costs. The portion of Schedule E titled “Part I” will be the single portion you have to complete. A handful of critical tips to be aware of: when reporting on the rental that you mutually own with a partner, who isn’t your wife or husband, you will only have to report the expenditures which you incurred and the revenue you received. Try to remember, also, that you will need to allocate costs between rental and non-rental use when you are renting a portion of your personal property, or when you rented only for part of the entire year. Read the compilation of articles entitled Tax Deductible Rental Property Expenses, included with this Guide, for more tips.

Form 4562. At line 18 of Schedule E, you are able to deduct the depreciation of your rental property, that you will fill out Form 4562 to calculate. For more information, look at the article titled, Depreciation Expenses for Rental Property, which is provided in this Guide.

Partnership/Corporate Ownership

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

Form 1065/1120-S. If you have a partnership, you must employ Form 1065, the tax form a collaboration uses to report all of its organization activities. Form 1120-S is used by an S corporation to report enterprise activities. Schedule K, line 2 of Form 1065 or 1120-S the place your annual net leasing deficit or earnings are reported (Schedule K is embedded inside these documents).

Form 8825. This document operates just like Schedule E, but is for partnerships and S corporations. Schedule E and Form 8852 are in essence very much the same. Make certain that all earnings and expenditures accrued by the corporation or partnership are provided in their whole amounts (they are going to be divided among each partner or investor later).

Schedule K-1. This tax document reports the net rental property earnings or deficit due to each partner or investor in accordance with that partner or investor’s ownership interest. Every partner should get their own K-1 and must report the elements of their K-1 on their Form 1040, Schedule E, Part II.

Limited Liability Co-ownership

A one owner LLC is really a disregarded entity for tax requirements, meaning that you can file as if you’re an individual property owner (look above). A multiple-member LLC might choose to be taxed as either a partnership or as an S corporation (look above).

Kent 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.