Necessary Tax Documents for Reporting Leasing Income

Being a property manager, to accurately record and report your own rental income to the IRS, you need multiple Revenue Service tax forms which will be outlined inside of this article. As is discussed in this article, the tax documents needed will be different, depending on the kind of authorized entity that is the owner of the property (individual, partnership, corporation, or LLC). Read the page titled Best Rental Property Ownership, included with this Guide, for more concerning legal entity property ownership.

Quick Tip: All the forms mentioned just below are accessible on the IRS’s webpage, at: http://www.irs.gov/Forms-&-Pubs. The various required documents are found in any tax preparing programs, if you use one of them.

Individual Ownership

Shared rental property ownership with a significant other, joint tenancy with right of survivorship, and tenancy in common would be included in this.

Form 1040. First, you’ll require Form 1040, the form used by all independent tax payers. Found on line 17 of the first page of Form 1040 is the total rental income or loss, subject to taxes. Please note that as a landlord with rental property activity, you aren’t permitted to take advantage of shortened Forms 1040A or 1040-EZ.

Schedule E. A certain addendum to Form 1040 that you need to be familiar with is Schedule E. It has numerous functions, and the use that is meant for your needs is reporting of rental income and expenses. The one element of Schedule E you have to fill out is the part entitled as “Part 1″. A few critical notes to keep in mind: if you ever own the rental property mutually with a partner who is not your husband or wife, report only the earnings that you collected plus the expenditures that you sustained. Don’t forget, , that you have to keep track of your expenditures concerning rental and non-rental use if you are renting a portion of your personal residence, or whenever you only rented for part of the year. View the set of articles entitled Tax Deductible Rental Property Expenses, available with this Guide, for further advice.

Form 4562. Form 4562 must be used to calculate depreciation on your rental, which you can deduct on line 18 of Schedule E. For more information, look at the article titled, Depreciation Expenses for Rental Property, which is included in this Guide.

Partnership/Corporate Ownership

For example a general or limited partnership or S corporation.

Form 1065/1120-S. The tax form a collaboration employs to report all its business activities is Form 1065, that you must use if you have a collaboration. An S corporation utilizes Form 1120-S to report its company activities. The net rental profits or deficit are going to be reported on Schedule K, line 2 of Form 1065 or 1120-S (Schedule K is embedded in those forms).

Form 8825. This tax form acts similar to Schedule E, but is for partnerships and S corporations. It is actually in essence similar to Schedule E. Be sure to report complete sums of all profit and costs incurred by the partnership or corporation (they are allotted to each partner or shareholder later on).

Schedule K-1. The total leasing profits or loss as a result of each shareholder or business partner is reported by this tax document, according to the ownership interest of that shareholder or partner. Each partner gets their own K-1 and will have to report the details of their K-1 on their Form 1040, Schedule E, Part II.

Limited Liability Company (LLC) Ownership

A single owner LLC is really a disregarded entity for tax objectives, so that you can file just as if you’re an independent owner (look above). A multiple-member LLC may choose to be taxed as either a partnership or as an S corporation (notice 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.