Tax Documents that Will Be Needed for Reporting Leasing Income and Expenses

This important article concentrates on the many Revenue Service tax documents you’ll require as a property manager so that you can properly record, and report, your annual leasing profit to the Internal Revenue Service. In accordance with the kind of authorized organization which manages the rental, the tax forms called for vary, as is discussed in the following paragraphs (individual, partnership, corporation, or LLC). For more concerning legal entity ownership, find the article in this Guide, called Best Rental Property Ownership.

NOTE: The various documents discussed in the next paragraphs are located on the Internal Revenue Service’s webpage, at: http://www.irs.gov/Forms-&-Pubs. All the required forms are going to be available in any tax preparation computer software, if you have one.

Individual Ownership

Such as joint property ownership with a significant other, tenancy in common, or shared tenancy with legal rights of survivorship.

Form 1040. Foremost, you need Form 1040, the document used by all individual taxpayers. Your annual net rental revenue or losses subject to taxation will be on line 17 on the very first page of the Form 1040. Be aware that as a landlord with rental income and expenses, you’re not allowed to employ the simple Forms 1040A or 1040-EZ.

Schedule E. Schedule E is an addendum of Form 1040. It really has many usages, though the purpose meant for your needs is reporting of rental property profits and costs. The part of Schedule E marked as “Part I” is the single part you need to fill out. There are certain critical tips that you should remember, which include: if reporting on a rental you mutually own with a person, who isn’t your husband or wife, you will only be required to report the expenditures that you accrued along with the income that you earned. Additionally, remember if you rented for only part of the year, or if you were renting a portion of your home, you have to distribute costs concerning rental and non-rental usage. For additional details, check out Tax Deductible Rental Property Expenses, the article set that’s provided in this Guide.

Form 4562. Form 4562 is employed to determine depreciation for your rental property, that you’ll deduct on line 18 of Schedule E. Look at the article called Depreciation Expenses for Rental Property, included with this Guide, for further info.

Partnership/Corporate Ownership

Including a general or limited partnership, or S corporation.

Form 1065/1120-S. When you have a collaboration, you need to use Form 1065, the form a collaboration utilizes to report all of its enterprise activities. Form 1120-S is employed by an S corporation to report company activities. Your annual net rental property revenue or loss are reported on Schedule K, line 2 of Form 1065 or 1120-S (Schedule K is embedded within these documents).

Form 8825. Form 8825 is for partnerships and S corporations, but it works similar to Schedule E. It is basically a lot like Schedule E. Make sure you disclose total sums of all earnings and costs accrued by the partnership or corporation (Later on, they are going to be allotted to each investor or business partner).

Schedule K-1. The net leasing income or losses as a result of each investor or partner is reported by this tax form, in accordance with the rental property ownership interest of that shareholder or partner. Each partner is provided with their own K-1 and will report the elements of that K-1 on their Form 1040, Schedule E, Part II.

Limited Liability Company (LLC) Ownership

You may file as if you are an individual rental property owner since, for income tax uses, a single-member LLC is really a disregarded entity (look above). A multiple-member LLC may choose to be taxed either as a partnership or as an S corporation (look above).

Renton 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.