A friend told me that her tax advisor said there is a new law as of June 1, 2009, that says you need to have a Fed Tax ID inorder to claim expense deductions on rental property starting with the 09 tax year. She was referring, I think, to an EIN and not a social sec. number which we all have to have anyway to file taxes. She and her husband have just one rental property but their combined income puts them in this “new” category. I have never heard of needing an EIN for one property but since we just bought, fixed up and are renting our first one I thought I better try to find out if this is true.
Has anyone every heard of this? Any tax people out there who might know of this?I have asked my friend to contact her Tax advisor and get the IRS code citation so I can look this up. She said she would. So far I have not found any information on the internet about anything like this at all.
Yeah, that would not make any sense to require property owners to have an EIN, especially if they have the property titled under their own name, the EIN would be irrelevant. I haven’t heard any such described rumors either.
Thank you both for your feedback. I have asked my friend to contact her tax person and find out the IRS citation number. If she comes through I will post it here.
But it is still wise to have an EIN and set up your property under a LLC for liabilty protection. Very cheap to do so in Indiana.
About $90 for the LLC filing with the Secretary of State. Takes about 10 minutes to fill out and few hours to approve.
Then you go to the IRS site and get your EIN in like 5 minutes.
Also, since it all flows to a single member on the LLC it is simple for taxes and all flows to the single member. So no “special” filings every month or quarter.
They are probably talking about qualifying as a “real estate professional” for tax purposes. This allow you to take unlimited deductions on your property. A license can be used as a portion of the qualification.
Well, my friend got back to me, sort of. She said the license is a “business license type 113 for rental property”. They were also told to get (and I quote) “a state ID from the Franchise tax board” - we are in California. State Tax ID is basically an EIN, Employer Identification Number. So, I guess I will start researching again. If anyone finds info on this it will sure be appreciated.
dpie