Rental Income Tax Forms for Property Owner, Partnership or LLC
If this is your first time filing rental income taxes or if there has been a recent change in the ownership structure of your rental properties, you may have a number of questions on the types of forms you need to remit to the IRS. It’s always best to consult a tax professional or to hire an accountant if you are unsure of how to proceed. But if you’re a courageous DIY landlord, here is a quick guide on how to treat income tax filing based upon your situation.
* Individual Owners of Rental Properties
If your rental property title is under your name instead of a business entity such as a partnership or a limited liability company, then you need to use Schedule E, Supplemental Income and Loss, to report your rental income and expenses. You can use this form to record all property related income and expenses during the year. If you earned a profit from your rental property activities, you should add this amount to your overall income (i.e. salary from a job) and report the total on IRS Form 1040. If you incurred a loss, you may be able to deduct this amount from your overall income, but you should check with an accountant or a knowledgeable bookkeeper on the guidelines and restrictions for claiming the loss against your income.
* Co-Ownership with Non-Spouses
If you co-own the rental property with one or more co-owners who is not your spouse, each co-owner should individually report their share of the rental income on their own tax return by using the Schedule E, Supplemental Income and Loss. Each owner’s share is based on their ownership interest. If, for example, you own 70% of the property shared with an investment partner who owns the other 30%, you should claim the 70% share of the overall income and expenses in your Schedule E, which you would file along with your income tax return Form 1040.
* Co-Ownership by Spouses
If a married couple who jointly owns a rental property files a joint income tax return, as most do, the couple should report rental income and deductions from the jointly owned property on a single Schedule E, Supplemental Income and Loss form along with their return Form 1040.
Rental Property Owned by a Business Entity
Landlords who own their properties through business entities will have a lot more forms to fill out, and tax filing becomes a daunting task. Business entities, such as general or limited partnerships or S corporations, will need to report their rental income or loss using the IRS Form 8825 Rental Real Estate Income and Expenses of a Partnership or an S Corporation. Form 8825 is very similar to the Schedule E that an individual owner with sole title would use to file their rental income taxes.
* General or Limited Partnerships
In addition to filling out the IRS Form 8825 Rental Real Estate Income and Expenses of a Partnership or an S Corporation, these business entities would need to file their taxes using Form 1065, U.S. Return of Partnership Income to report revenues, expenses, gains, and losses of their business operation. The partnership must also provide each partner with an IRS Schedule K-1 Partner’s Share of Income, Credits, Deductions, etc., that shows the net profits or loss attributable to each partner or shareholder as outlined by the partner or shareholder’s ownership interest. A copy of Schedule K-1 must accompany a copy of IRS Form 1065. The partners must also file Schedule E, Supplemental Income and Loss, along with their individual income tax returns IRS Form 1040. Partners would complete the second page of Schedule E and not the first page, which is used for individual owners of rental property. Therefore, in total 5 forms will need to be filed: Form 8825, Form 1065, Schedule K-1, Form 1040 and Schedule E (page 2).
* S Corporations
In addition to IRS Form 8825 Rental Real Estate Income and Expenses of a Partnership or an S Corporation, S Corporations must use IRS Form 1120S, U.S. Income Tax Return for an S Corporation, to report business earnings or loss and each shareholder’s portion of the corporate income or loss. An information return is a return filed by an entity that doesn’t pay any taxes itself. Its purpose is to show the IRS how much tax the entity’s owners owe. Like partners in a partnership, the shareholders must complete the second page of Schedule E, Supplemental Income and Loss, showing their shares of the corporation’s income or losses, and file it with their individual tax returns Form 1040. Therefore, in total, 4 forms will need to be filed: Form 8825, Form 1120S (includes Schedule K), Form 1040 and Schedule E (page 2).
* Limited Liability Companies
A Limited Liability Company (LLC) with only one member can act like a sole proprietorship for tax purposes. The owner reports profits, losses, and deductions on Schedule E, Supplemental Income and Loss, like an individual rental property owner along with IRS Form 1040. But an LLC with two or more members is treated like a partnership for tax purposes, except in the unusual situation where the owners choose to have it treated like a C or S corporation (see above). Check with your accountant to ensure you get the full benefit and guidelines on filing as an LLC.
Regardless of whether you decide to file these tax forms yourself or have an accountant fill them out for you, it would save you a great deal of time and effort by organizing your finances with Pendo:
- Automatically import banking transactions, Pendo removes the burden of tedious manual input
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- Attach individual receipts to transactions, email tenants invoices
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- Advanced filtering and categorization redefine reporting flexibility
- Export reports to CSV files – Pendo makes it so easy to fill out IRS forms by yourself