Tax Forms which Will Be Mandatory for Reporting Leasing Income

This particular brief article concentrates on the many Internal Revenue Service tax documents you need as a property owner so that you can completely record, and report, your own rental property income to the Revenue Service. As detailed in the next paragraphs, the tax forms needed are different, depending on the sort of authorized entity who manages the property (individual, partnership, corporation, or LLC). For additional information on legal entity ownership, see the article found in this Guide, called Best Rental Property Ownership.

Quick Note: Each of the documents covered here are available on the Revenue Service’s website, at: http://www.irs.gov/Forms-&-Pubs. If you work with tax preparing software applications, the software program contains each of the appropriate documents.

Individual Ownership

For example joint rental property ownership with a wife or husband, tenancy in common, or shared tenancy with right of survivorship.

Form 1040. First and foremost, you need Form 1040, the tax form submitted by all individual people. The total rental property earnings or loss subject to taxation are at line 17 on the very first page of the Form 1040. Be aware that as a landlord with rental property income and expenses, you’re not allowed to take advantage of the simple Forms 1040A or 1040-EZ.

Schedule E. Schedule E is a certain addendum of Form 1040. It actually has a variety of uses, however the purpose meant for you is reporting of rental property revenue and expenditures. The element of Schedule E marked as “Part I” is the one portion you must fill out. A couple of critical notes to be aware of: whenever reporting on the rental property you jointly own with anyone, who isn’t your significant other, you only need to report the costs you incurred and the profits which you received. Don’t forget, also, that you will have to keep track of your costs between rental and non-rental use if you are renting a segment of your own personal home, or whenever you leased only for a portion of the entire year. Look at the set of articles titled Tax Deductible Rental Property Expenses, contained inside of this Guide, for further info.

Form 4562. Form 4562 is used to quantify depreciation on the rental property, which you’ll want to deduct on line 18 of Schedule E. For further advice, see the article titled, Depreciation Expenses for Rental Property, which is provided in this Guide.

Partnership/Corporate Ownership

This includes a general or limited partnership or S corporation.

Form 1065/1120-S. The form a joint venture utilizes to report each one of its company operations is Form 1065, which you will have to fill out if you have a joint venture. Form 1120-S is employed by an S corporation to report business activities. Schedule K, line 2 of Form 1065 or 1120-S is the place the total rental property financial loss or earnings are going to be reported (Schedule K is embedded within the documents).

Form 8825. This form functions similar to Schedule E, except that it’s for partnerships and S corporations. It’s basically a lot like Schedule E. Make certain that all profit and expenditures suffered by the corporation or partnership are included in their total sums (these are going to be allotted to each business partner or shareholder down the road).

Schedule K-1. The net rental revenue or losses owing to each shareholder or partner is reported by this form, according to the property ownership interest of that shareholder or business partner. Each and every business partner should get his or her own K-1 and will report the details of their K-1 on his / her Form 1040, Schedule E, Part II.

Limited Liability Company Ownership

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

Seattle 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.