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Rental Properties and The Schedule E Tax Form

If you are investing in rental property, then you’ll become well-acquainted with the Schedule E tax form. The Schedule E is where you’ll report all of your expenses and income for the year, and take advantage of any deductions you may want to claim.

Read below for learn more about the Schedule E and why it matters to your investment property business.

To properly fill out the Schedule E, you’ll have to keep detailed records of your expenses and income. These include:

  • Rental income
  • Purchase price of the property
  • Security deposits received
  • Depreciation

On the expense side, you’ll need to keep track of:

  • Property management fees
  • Advertising costs
  • Real estate taxes
  • Security deposits reimbursed
  • Property insurance
  • Property management fees
  • Maintenance, cleaning, repair expenditures
  • Utilities, waste collection fees, etc.

The Schedule E offers a place for each of these expenses: all you have to do is fill in each category on the form.

It’s important to reiterate how important it is that you get as many deductions as you can. For each dollar deducted, you can get 35 cents off your tax bill. Conversely, if you don’t claim a deduction that you could have, you’ll end up paying taxes on money you never made.

Passive Activity Loss Limit

To the IRS, rental properties are a source of passive income. So, your losses for a single year are limited to $25,000. Should you lose more than that, you’ll have to carry the difference over to the next year. While losses are always rough, the good news is that the difference will allow you to reduce your tax liability next year.

Buying an investment property can help you reach your financial goals. Even though the IRS considers it a passive income stream, in reality it will take a lot of work. So, be prepared to spend time on maintenance, advertising, interacting with tenants, but most of all, making sure you fill out your taxes properly.

Download Free Guide: 7 Things to Know  About Real Estate Accounting Software


Are you interested in learning more about income tax services in Washington DC or another location? We offer business accounting services for the local Washington DC area, as well as virtual services that are available for people anywhere in the United States. Contact us to learn more: (202) 789-8898

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