Due to Security Concerns, we do not  respond to unsolicited emails nor do we open unsolicited attachments.  Please call our office for assistance.




PO Box 2214       Oregon City OR 97045       503-656-0699


Checklist for Rental Tax Preparation

Rental Income and Expenses

 


Home Page

Your Personal Taxes

Tax News You Can Use

Our Newsletter

Itemized Deductions

Federal Tax Deduction Amounts

 Business Accounting & Taxes

Financial Services

About Our Staff

Map


 
Comments on this website are informational in nature and are not intended to
be interpreted as specific tax advice.   The comments cannot be used to avoid taxes under the Internal Revenue Code or the regulations of other tax authorities. Furthermore, this website is not intended, and should not be interpreted, to support the promotion or marketing of any tax avoidance schemes.

 

Date last modified:
01/26/17
 

Taxwise, rentals can be quite complicated to report.  In most cases, income from renting a house, property, building, equipment, vehicle, etc. must be reported to the Internal Revenue Service and state and local tax authorities. Generally, the rental activity will be reported on Schedule E which is then attached to the personal tax return, Form 1040. Rental rules and treatments vary with the type of property and may be dependent on other factors.

Rents received are reported as income. Deposits not refunded to renters are also reported as income. A broad range of expenses are allowed, including repairs, landscaping, advertising, dues and memberships, insurance, property taxes, mortgage interest, management fees, mileage, etc. Major work that may upgrade or increase the value of the rental property is usually added to the basis of the rental and depreciated. This may include remodeling the interior, installing new windows, replacing siding, replacing the roof, putting on a deck, redoing the driveway, etc. Rental dwelling values are split between the home and the land. The building is depreciated; the land is not. Furnishings and appliances purchased for a rental are also usually depreciated.

When a rental is sold, a calculation is made to determine if there is any taxable gain. Simply put, the adjusted basis of the rental property (purchase price plus capitalized improvements) is subtracted from the sales price. There may also be an adjustment for depreciation taken over the years. When you sell property that was converted to or from personal use from rental use, you may have to prorate the figures based on the amount of time it was a rental versus personal.

Special rules apply to rental of personal residences and vacation homes, when there is both personal use and rental use. Another special type of rental occurs when a property is rented at less than comparable market rates. It may be considered a "rental not-for-profit". This might occur when the taxpayer is renting to a family member or friend that he/she wants to help. If a property is vacant for a period of time, expenses may need to be prorated depending on the circumstances for the vacancy. When a homeowner rents out rooms in his/her personal residence, the income and expenses are reportable, taxable activity.

Businesses should take care if they rent property, vehicles, equipment, etc. from their owner or shareholder. The arrangement should be in writing, a fair rent amount agreed upon and a check exchanged to pay the rent. Rents should never replace compensation when the owner is an employee of the business. The owner/shareholder must then report rental income on his/her personal tax return.