Customary Tax Documents Concerning Deductions on Leasing Activity

This brief article is focused on the many IRS tax documents you will need as a property manager in order to completely account for, and report, your annual leasing income to the IRS. As is outlined in this article, the tax forms necessary are different, in accordance with the particular official business that manages the rental (individual, partnership, corporation, or LLC). Read the article entitled Best Rental Property Ownership, with this Guide, for more information about legal entity ownership.

NOTE: All the forms outlined below are available on the Internal Revenue Service’s website, at: http://www.irs.gov/Forms-&-Pubs. When you’re using tax preparing software, the program will have the different necessary forms.

Individual Ownership

For example joint rental property ownership with a partner, tenancy in common, or shared tenancy with rights of survivorship.

Form 1040. All independent tax payers will have to fill out Form 1040, and that is the place you should get started. Found on line 17 of the first page of Form 1040 is the net rental revenue or loss, subject to taxation. Note that as a law abiding landlord with rental property income and expenses, you won’t be allowed to take advantage of the simple Forms 1040A or 1040-EZ.

Schedule E. Schedule E is a certain addendum of Form 1040. Of this addendum’s various applications, just the application of reporting rental property income and expenditures is useful to your needs. The portion of Schedule E titled as “Part 1” will be the only section you must fill out. There are certain essential notes you should keep in mind, including: whenever reporting on a rental that you jointly own with a person, who is not your husband or wife, you will only need to report the costs you incurred along with the income you acquired. Keep in mind, furthermore, that you have to distribute expenses regarding rental and non-rental usage when you’re leasing a section of your house, or if you leased only for part of the entire year. To get more advice, find Tax Deductible Rental Property Expenses, the article set that’s found with this Guide.

Form 4562. On line 18 of Schedule E, you will deduct the depreciation for your rental, which you must employ Form 4562 to figure out. To get more tips, see the article called, Depreciation Expenses for Rental Property, that’s included in this Guide.

Partnership/Corporate Ownership

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

Form 1065/1120-S. For people with a partnership, you must use Form 1065, the form a collaboration uses to report all of its organization operations. Form 1120-S is used by an S corporation to report company operations. Schedule K, line 2 of Form 1065 or 1120-S is the place where your own total rental property loss or profits are reported (Schedule K is embedded into the documents).

Form 8825. This tax form acts like Schedule E, but for partnerships and S corporations. It is essentially much like Schedule E. Be certain that all earnings and expenditures suffered by the corporation or partnership are included in their complete amounts (In the future, they are going to be allocated to each investor or business partner).

Schedule K-1. This tax document reports the net rental revenue or losses due to each business partner or shareholder as outlined by that business partner or shareholder’s property ownership interest. Every partner will get his / her own K-1 and will report the information of the K-1 on their Form 1040, Schedule E, Part II.

Limited Liability Co-ownership

You’ll be able to file just like you’re an individual property owner considering that, for taxation uses, a single-member LLC is a disregarded entity (look above). A multiple-member LLC has the option to be taxed as a partnership or as an S corporation (look above).

Redmond 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.