Rental income...........how does it work? (real estate, apartment, rentals)

[sssb2000]

Does including rental property income count exactly the same way as do regular wages when it comes to paying taxes?

say i make 50k, and get 1k a month from renters.
does that make my income as 62k in the eye of the IRS? ie. do i have to pay regular (I think i'm in the 23% bracket) taxes on the 12k?

any other info is appreciated.

[novahousehunter]

Yes, it is part of your income and taxed as such, though you can also write off expenses

How Residential Rental Income is Taxed


Not sure if this is at all related, but it would not be a good idea to rent out an illegal apartment (if this is your friend's illegally finished basement we are talking about). That could nullify any sort of rental agreement so you could not legally collect rent/damages from your tenant, yet they could still sue you for any number of things (including just not informing them it was an illegal apt).

[sssb2000]

Originally Posted by novahousehunter

Yes, it is part of your income and taxed as such, though you can also write off expenses

How Residential Rental Income is Taxed


Not sure if this is at all related, but it would not be a good idea to rent out an illegal apartment (if this is your friend's illegally finished basement we are talking about). That could nullify any sort of rental agreement so you could not legally collect rent/damages from your tenant, yet they could still sue you for any number of things (including just not informing them it was an illegal apt).

if you're implying that i was lying about my friend's basement, then <forget>you! but if you're just an idiot who made a stupid remark, then i forgive you.

Moderator:While the substitute words may be obvious, the point is that profanity is not tolerated on the forum.

FYI though, this is for my condo that i'm renting out; not that it's any of your gosh darn business. :-)

[becwells]

Originally Posted by sssb2000

if you're implying that i was lying about my friend's basement, then ...you! but if you're just an idiot who made a stupid remark, then i forgive you.

FYI though, this is for my condo that i'm renting out; not that it's any of your god damn business. :-)

I thought you said you were 27?

I'm curious to see what clever ways you'll think of to dodge paying taxes on your rental income.

[Skapov]

No, it does not count as "Wages" and so you don't add the rental income to your work-income. However, it is taxed up to a point so please investigate before you prepare to pay more taxes. I believe the tax is lower because you can write-off for example, cost to heat/cool the space and repairs etc.

[sssb2000]

Originally Posted by becwells

I thought you said you were 27?

I'm curious to see what clever ways you'll think of to dodge paying taxes on your rental income.

i AM 27! what about it? just because you're a loser, you think others are too?
and i'm not trying to dodge paying taxes. that's why i'm inquiring about it here. I want to make sure that next year, i do the taxes properly and neither overpay or underpay.

[FindingZen]

Originally Posted by sssb2000

i AM 27! what about it? just because you're a loser, you think others are too?
and i'm not trying to dodge paying taxes. that's why i'm inquiring about it here. I want to make sure that next year, i do the taxes properly and neither overpay or underpay.

No one is a "loser" here; we're all winners.

[VRE332]

Generally, cash or the fair market value of property you receive for the use of real estate or personal property is taxable to you as rental income. You can generally deduct expenses of renting property from your rental income. Income and expenses related to real estate rentals are usually reported on Form 1040, Schedule E (PDF). Income and expenses related to personal property rentals are reported on Form 1040 (PDF).
Most individuals operate on a cash basis, which means they count their rental income as income when it is actually or constructively received, and deduct their expenses as they are paid. If you are a cash basis taxpayer, you cannot deduct uncollected rents as an expense because you have not included those rents in income. If a tenant pays you to cancel a lease, this money is also rental income and is reported in the year you receive it. Do not include a security deposit in your income if you plan to return it to the tenant at the end of the lease. But if you keep part or all of the security deposit during any year because the tenant damaged the property or did not live up to the terms of the lease, this money is taxable income in the year this determination is made. If the security deposit is to be used as the tenant's final month's rent, you include the money as income when you receive it, rather than when you apply it to the last month's rent.
Some examples of expenses that may be deducted from your total rental income are depreciation, repairs, and operating expenses. You can recover some or all of your original expenses and improvements by using Form 4562 (PDF) (to report depreciation) beginning in the year your rental property is first placed in service, and beginning in any year you make an improvement or add furnishings. For information on depreciation, refer to Publication 946, How To Depreciate Property. Repair costs, such as materials, are usually deductible. For a discussion of the difference between repairs and improvements, refer to Publication 527, Residential Rental Property (Including Rental of Vacation Homes).
There are special rules relating to the rental of real property that you also use as your main home or your vacation home. For information on income from these rentals, or from renting at an amount less than the fair market value, refer to Topic 415, Renting Residential and Vacation Property (formerly Renting Vacation Property and Renting to Relatives).
If you do not use the rental property as a home and you are renting to make a profit, your deductible rental expenses can be more than your gross rental income, subject to certain limits. For information on these limitations, refer to Topic 425, Passive Activities – Losses and Credits.
For more information on rental income and expenses, including passive activity loss limits, refer to Publication 527

[Skapov]

Said just like an Accountant!

Originally Posted by VRE332

Generally, cash or the fair market value of property you receive for the use of real estate or personal property is taxable to you as rental income. You can generally deduct expenses of renting property from your rental income. Income and expenses related to real estate rentals are usually reported on Form 1040, Schedule E (PDF). Income and expenses related to personal property rentals are reported on Form 1040 (PDF).
Most individuals operate on a cash basis, which means they count their rental income as income when it is actually or constructively received, and deduct their expenses as they are paid. If you are a cash basis taxpayer, you cannot deduct uncollected rents as an expense because you have not included those rents in income. If a tenant pays you to cancel a lease, this money is also rental income and is reported in the year you receive it. Do not include a security deposit in your income if you plan to return it to the tenant at the end of the lease. But if you keep part or all of the security deposit during any year because the tenant damaged the property or did not live up to the terms of the lease, this money is taxable income in the year this determination is made. If the security deposit is to be used as the tenant's final month's rent, you include the money as income when you receive it, rather than when you apply it to the last month's rent.
Some examples of expenses that may be deducted from your total rental income are depreciation, repairs, and operating expenses. You can recover some or all of your original expenses and improvements by using Form 4562 (PDF) (to report depreciation) beginning in the year your rental property is first placed in service, and beginning in any year you make an improvement or add furnishings. For information on depreciation, refer to Publication 946, How To Depreciate Property. Repair costs, such as materials, are usually deductible. For a discussion of the difference between repairs and improvements, refer to Publication 527, Residential Rental Property (Including Rental of Vacation Homes).
There are special rules relating to the rental of real property that you also use as your main home or your vacation home. For information on income from these rentals, or from renting at an amount less than the fair market value, refer to Topic 415, Renting Residential and Vacation Property (formerly Renting Vacation Property and Renting to Relatives).
If you do not use the rental property as a home and you are renting to make a profit, your deductible rental expenses can be more than your gross rental income, subject to certain limits. For information on these limitations, refer to Topic 425, Passive Activities – Losses and Credits.
For more information on rental income and expenses, including passive activity loss limits, refer to Publication 527

[Doggz3]

Long story short: you report your rental income and expenses on Schedule E. Only the net gain (i.e. income over expenses) is reported on the 1040.
Example:

$10,00 in rent collected

$4,000 in mortgage interest
$500 in fire insurance
$1,000 for management expenses
$800 for repairs
$2,000 for depreciation (if you choose to take it - you have to add this back in when you sell if you do)


income to report on 1040 = $1,700

capeesh?

Net losses are subject to passive loss activity rules, but if your income is in the $50,000 range, you should be able to take some losses from your investment if you go cash negative (i.e. in years that your expenses exceed your income).