Tax Documents which will be Mandatory for Reporting Rental Property Income and Expenses

As a good property manager, to accurately record and report your annual rental income to the IRS, you’ll require a variety of different Internal Revenue Service tax documents that are described within this brief article. As is laid out directly below, the tax documents required will vary in accordance with the type of professional organization that possesses the rental property (individual, partnership, corporation, or LLC). For more details on legal entity rental property ownership, look at the article within this Guide, titled Best Rental Property Ownership.

Quick Tip: The documents described in this article are available on the IRS’s website, at: http://www.irs.gov/Forms-&-Pubs. All the appropriate forms will likely be contained in any tax preparing software, should you use one.

Individual Ownership

Including mutual property ownership with a wife or husband, tenancy in common, or shared tenancy with legal rights of survivorship.

Form 1040. Foremost, you’ll require Form 1040, the tax form filed by all individual citizens. Your total leasing revenue or financial loss subjected to taxation will appear at line 17 of the first page in Form 1040. You are not able to work with the simplified Forms 1040A or 1040-EZ, as a landlord with rental property activity.

Schedule E. The addendum to Form 1040 you have to know about is Schedule E. Of this addendum’s diverse uses, just the use of reporting rental income and expenditures is important to yourself. The only section of Schedule E that you must finish is the part marked “Part I”. There are several essential notes you should be aware of, including: when you own the rental mutually with someone other than your husband or wife, report only revenue that you received along with the costs which you suffered. Bear in mind, additionally, that you’ll have to allocate expenditures relating to rental and non-rental usage should you be leasing a segment of your own home, or when you rented only for a part of the year. For more details, check out Tax Deductible Rental Property Expenses, the article collection that is available within this Guide.

Form 4562. Form 4562 is needed to quantify depreciation on your property, which you can deduct on line 18 of Schedule E. For further advice, find the article titled, Depreciation Expenses for Rental Property, that’s found in this Guide.

Partnership/Corporate Ownership

A general or limited partnership, or S corporation is included.

Form 1065/1120-S. The form a partnership employs to report each of its organization activities is Form 1065, that you will need to fill out when you have a partnership. Form 1120-S is utilized by an S corporation to report business operations. Your current net rental profit or loss are reported on Schedule K, line 2 of Form 1065 or 1120-S (Such forms are incorporated with Schedule K).

Form 8825. Form 8825 is for partnerships and S corporations, but works just like Schedule E. Schedule E and Form 8852 are basically very similar. Make sure you disclose total sums of any earnings and expenses suffered by the partnership or corporation (In the future, they should be allocated to each investor or business partner).

Schedule K-1. This document reports the total rental income or deficit attributable to each partner or investor relative to that business partner or investor’s property ownership interest. Every business partner receives his / her very own K-1 and must report the contents of the K-1 on their own Form 1040, Schedule E, Part II.

Limited Liability Company Ownership

A single owner LLC is a disregarded entity for tax usage, so that you could file like you’re an independent property owner (see above). A multiple-member LLC can decide to be taxed either as 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.