Having rental property is a common way for many people to generate additional income. You may find yourself interested in this type of venture due to recently inheriting property or due to purchasing property specifically as a rental. While excited about your new income avenue, you likely also know that acting as a rental property owner and landlord will involve a considerable amount of work.
In addition to making sure your tenants stay happy with the property, you also have financial obligations relating to your rental income. While it may seem like more of a passive way to earn extra money as opposed to another full-time job you may have, you still need to take care of paying taxes on the rent payments you receive.
Reporting rental income
Just like any other type of income stream, you will need to report your rental income on your next tax return. You will have specific forms to use to report your income, expenses and depreciation associated with the rental property you have. If you have more than one rental property, you will need to provide this information for each location. This information is provided on the Schedule E form, and you may attach as many Schedule E forms as necessary.
As a landlord and rental property owner, it would work in your best interests to keep various records regarding your endeavors. These records can reflect your income from each renter and the expenses associated with the property, like those incurred when making repairs. Keeping your receipts for expenses relating to the rental property may also be wise. These records could help provide evidence to support your tax information in the event that you face an audit.
As a rental property owner, you may have the ability to deduct certain expenses when it comes tax time. You may deduct ordinary and necessary expenses you face for managing and maintaining the property. Examples of these expenses include the following:
- Mortgage interest
- Property taxes
Of course, making the right deductions could prove tricky, and it may help you to gain more information on this and other related rental income tax topics.
If this is your first time having rental income, you may understandably feel uncertain about whether you will file your taxes correctly. Fortunately, you can consult with a legal professional experienced in tax law to help you prepare your taxes when the time comes and to help you understand any steps you need to take to meet necessary tax regulations throughout the year.