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Why Schedule E is So Important for Landlords

If you are investing in rental properties, 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 to learn more about the Schedule E and why it matters to your investment property business. 

Unlike wages from a job or a business you participate in, rental income isn't considered to be earned incomeSchedule E is used to report "passive" income which is not subject to the additional self-employment tax. Passive income is income that you receive, but don't actually work for and "earn". 

To properly fill out the Schedule E, you’ll have to keep detailed records of your expenses and income. Those records will help you fill in each category on the Schedule E form. 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.

It’s important to reiterate how important it is that you get as many deductions as you can. If you don’t claim a deduction that you could have, you’ll end up paying taxes on money you never made.

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.

Note: The Tax Cuts and Jobs Act (TCJA) enacted changes to the Internal Revenue Code that affect  real estate investors and landlords. Property owners should consult their accountants and tax professionals for explanations of the new tax law’s provisions. 

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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