As a landlord, to fully account for and report your rental profit to the Internal Revenue Service, you need a variety of different Revenue Service tax documents which will be specified inside of this short article. In accordance with the particular legal company that manages the property, the tax documents called for are different, as is discussed below (individual, partnership, corporation, or LLC). For more information regarding legal entity property ownership, read the article in this Guide, entitled Best Rental Property Ownership.
TIP: You will find the different documents highlighted just below on the IRS’s webpage: http://www.irs.gov/Forms-&-Pubs. All of the required documents should be provided in any tax prep software, should you use one.
Shared ownership with a significant other, shared tenancy with rights of survivorship, and also tenancy in common would be examples.
Form 1040. Foremost, you’ll require Form 1040, the tax form used by all individual people. On line 17 of the first page of Form 1040 will be the total rental property revenue or deficit, subject to tax. You will not be permitted to use the simple Forms 1040A or 1040-EZ, as a property owner with rental property activity.
Schedule E. Schedule E is one addendum of Form 1040. Of Schedule E’s numerous functions, just the use of reporting leasing revenue and costs is useful to you. The part of Schedule E labeled “Part I” is the one part you have to fill out. Some important tips to remember: when reporting on a rental property that you jointly own with another person, other than your significant other, you will only be required to report the costs which you suffered plus the earnings which you collected. Additionally, bear in mind that if you leased just for part of the entire year, or you are leasing a portion of your own personal house, you need to distribute costs between rental and non-rental purposes. View the set of articles titled Tax Deductible Rental Property Expenses, included with this Guide, for further info.
Form 4562. Form 4562 is required to quantify depreciation on the rental, which you’ll deduct on line 18 of Schedule E. Read the article titled Depreciation Expenses for Rental Property, available in this Guide, for additional advice.
For example a general or limited partnership or S corporation.
Form 1065/1120-S. The tax form a partnership utilizes to report all its company activities is Form 1065, which you must use if you’ve got a partnership. An S corporation uses Form 1120-S to report its business operations. Your annual total rental profit or deficit are reported on Schedule K, line 2 of Form 1065 or 1120-S (Schedule K is embedded in these forms).
Form 8825. Form 8825 is for partnerships and S corporations, and works like Schedule E. It is actually essentially very like Schedule E. Be sure to disclose full amounts of all profit and expenses suffered by the partnership or corporation (Later, they will be divided among each investor or partner).
Schedule K-1. This form reports the total rental profit or deficit owing to each partner or shareholder in accordance with that partner or investor’s property ownership interest. The elements of the K-1 provided to each partner will have to be reported on his / her Form 1040, Schedule E, Part II.
Limited Liability Company Ownership
You could file as if you are an independent rental property owner on the grounds that, for tax requirements, a single-member LLC is really a disregarded entity (see above). A multiple-member LLC may choose to be taxed as a partnership or as an S corporation (notice 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.