When it comes to reporting taxes on rental income there are a few things that real estate investors need to know. First, you need to know how rental income is taxed, second how you need to report rental income tax, and thirdly how to reduce your rental income tax.
With this knowledge at hand and the right tools in your pocket, you'll be able to maximize your rental property profitability by increasing tax deductions and decreasing your overall income tax liability.
In this episode, we discuss real estate tax strategies with CPA, Christanne Wright. Christanne is a real estate expert CPA who has a magnitude of experience helping real estate investors minimize their tax bills each and every year.
Christanne advises on the importance of good record keeping, saying, "If you don't keep good records, and the IRS is so dependant on record-keeping, that you run the risk of having a lot of, or even all of your expenses excluded from your tax file."
You must pay rental income tax on any property for which you receive payment in return for use or occupation. Rental income is taxed as ordinary income and you pay according to your marginal tax bracket, which is between 10% and 37%.
Rental income tax forms
Schedule E form 1040 to report your income expenses.
Schedule A form for any personal expenses associated with your rental property.
Form 4562. This allows you to report depreciation from the year you began leasing your rental property.
Form 8960 for net investment income tax applies to your rental income, you need to file.
Form 1099 for suppliers and reporting online rent collection.
In this guide, we look at how to categorize expenses for your rental property and take you through all of the different expense categories.
To help you streamline your tax season we've put together this guide outlining the main landlord tax documents you need to know about.
We take a look at the Schedule E from a real estate investors point of view and what each of the Schedule E categories mean.