Quick Tip: You will find the different documents mentioned below on the IRS’s website: http://www.irs.gov/Forms-&-Pubs. When you’re using tax preparation computer software, the software program has the different appropriate documents.

Individual Ownership

Mutual ownership with a partner, joint tenancy with rights of survivorship, as well as tenancy in common are actually examples.

Form 1040. All individual citizens will need to fill out Form 1040, and that is where you need to get started. Your current total leasing earnings or losses subjected to taxation will be found at line 17 of the 1st page in Form 1040. Please note that as a law abiding property manager with rental property activity, you aren’t able to use the simple Forms 1040A or 1040-EZ.

Schedule E.
A certain addendum to Form 1040 you need to know about is Schedule E. It really has various applications, though the application that is applicable to you is reporting of rental property profit and expenditures. The part of Schedule E marked as “Part I” will be the only segment you need to fill out. Several essential notes to bear in mind: when reporting on a rental which you jointly own with anyone, other than your husband or wife, you will only need to report the expenditures that you incurred along with the profits you earned. In addition, remember that if you leased for only a part of the year, or if you are renting a section of your property, you have to keep track of your costs relating to rental and non-rental usage. Look at the set of articles titled Tax Deductible Rental Property Expenses, found within this Guide, for further advice.

Form 4562.
Form 4562 is needed to determine depreciation on your rental, which you can deduct at line 18 of Schedule E. For more details, look at the article entitled, Depreciation Expenses for Rental Property, which is found in this Guide.

Partnership/Corporate Ownership

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

Form 1065/1120-S. The tax form a partnership employs to report each one of its business operations is Form 1065, that you have to fill out when you have a collaboration. An S corporation utilizes Form 1120-S to report its business activities. Schedule K, line 2 of Form 1065 or 1120-S is where the total rental property losses or earnings are reported (Those documents are integrated with Schedule K).

Form 8825. This document functions like Schedule E, except that it’s for partnerships and S corporations. It’s fundamentally very similar to Schedule E. Make certain that all income and expenditures suffered by the corporation or partnership are provided in their entire sums (these are divided among each partner or investor later).

Schedule K-1. The net rental profit or losses attributable to each shareholder or business partner is reported by this tax document, in line with the property ownership interest of the shareholder or business partner. The information of the K-1 given to each business partner will have to be reported on their own Form 1040, Schedule E, Part II.

Limited Liability Co-ownership

A one member limited liability company is really a disregarded entity for taxation requirements, which means that you may file like you were an individual owner (look above). A multiple-member LLC might choose to be taxed 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.