I am a new landlord renting out my first rental property. Does the IRS consider rental income as regular income and tax accordingly (30%)? Are there any special tax breaks or deductions?
Have the same exact question. thnaks
The real answer to your question is…Consult a qualified CPA. Only a CPA can answer you question since you asking for tax advice.
That being said, I am NOT a CPA and this is NOT tax advice. My understanding of it is that it all depends on how you file it. If you file it on a Schedule E then it is considered “passive” income. Passive income is taxed at a lower rate. There are some other tax benefits which you may be eligble for also. However, it all depends on your particular situation so you should really consult a CPA or tax attorney for you individual needs.
for most RE investors with regular day jobs, the basic answer is you have to use Sch E. In this schedule, you show your income and expenses and calculate your total gain (or loss). In case of gain, it is taxed as income on your 1040. If it is a loss, it may (or may not) help to reduce your income (there are limitation based on your total loss and other income amt).
This is very simple and does not require a CPA unless you have very large losses and/or subject to limitations due to have an income >$100k .
Check it out at www.irs.gov. Its Sch E of the 1040.
Note, do not be confused by “taxes losses” and real cash flow losses; they are different. Usually rental properties show a loss since your get to take depreciation of the improvements (the building).
Good point aak. If you have a “day job” then you would likely file any rental income as a Sched E and consider it passive income. If your day job is rental income, chances are the IRS will want you to file on Sched C? and consider it active income.
I have 1 house that is a rental that i did a 100% rehab. I bought the house last october and didnt rent it out until May. Can i deduct the money put into the house last year on this years income taxes ? Also i am doing another house right now and just bought a truck. Can i deduct my truck into this as well? Ido have a fulltime day job that i get a W2. I’ll make about $4500 in rent this year and if i get this house done and sell it will prolly make about 15-20k on it.
you can not deduct rehab expense from 2004 since you did not place the house into rental service until May of this year. You have to wait until you sell the house and add them to your tax basis. You can take a deuction for the truck, but you have to choose between a mileage option or actual expenses/depreciation. you will not (should not) take a 100% of the mileage/expense unless it is used exclusively for that activity.