How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Lane Your Own Question
Lane
Lane, JD, CFP, MBA, CRPS
Category: Finance
Satisfied Customers: 11592
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
1929974
Type Your Finance Question Here...
Lane is online now
A new question is answered every 9 seconds

Now that I know which forms to file, I need some help with

Customer Question

Now that I know which forms to file, I need some help with entering my rental income.I have received 16800 in rental income and paid 12660 in mortgage. Is the different my profit on the rental?Also, could I pay my company 10,000 to manage the property? In other words, I am paying myself to manage my own property?Would it be best to include the expenses (money to buy new appliances, etc..) as my business expenses in schedule C or on the rental form (schedule E)? If I am paying my business to manage my property I am assuming I can include the expenses under the business?Thanks!
Submitted: 7 months ago.
Category: Finance
Expert:  Lane replied 7 months ago.

OK, (thanks for asking for me)

...

If you'll look at the schedule E here: https://www.irs.gov/pub/irs-pdf/f1040se.pdf

...

You'll see where the income (line 3) goes ... and then lines 5 through 19 are the other expenses.

...

Note that you don't deduct the entire mortgage payment (you didn't have to report the mortgage as income, so the payback isn't deductible) BUT the interest (your cost of borrowing is a deduction)

...

BUT, on the positive side, you get to take depreciation on the property (a way to slowly pover time get what you put into the property back as a tax deduction) even though there's no cash outlay for that each year.

...

Other deductions include Repairs, Supplies, property taxes, (the schedule E itself serves as a good memory jogger)

Expert:  Lane replied 7 months ago.

You have to segregate your rental income and expense on the schedule E becasue these are passive income and expense items... AND note that you can only take deductins up TO the amount of income (rental deductions and rental income)... FROM your other busines income and expenses that go on the schedule C

Expert:  Lane replied 7 months ago.

Finally, only true expenses can be expensed:

...

The basic rule is that the cost of “repairs” incurred to maintain your rental properties may be deducted from each property’s taxable income in a given year. However, some repairs are considered “improvements” in which you’re not allowed to deduct the entire expense immediately.

...

The IRS clarifies in the 1040 Schedule E Instructions that “repairs in most cases do not add significant value to the property or extend its life.

...

Anything that increases the value of the property or extends its life is categorized as a “capital expense” and must be capitalized and depreciated over multiple years. Meaning, you can only deduct a small but even portion of these expenses in the current tax year.

...

The house itself, (for residential property) is 27.5 years - Appliances over 5 years

...

I'm going to attach a image from Table 1-1 of IRS Pub. 527 that gives examples of the kinds of things that are improvements (rather than repair or other expenses) and that have to be depricated ocver time

Expert:  Lane replied 7 months ago.

Bot***** *****ne ... if you use turbotax, and list your properety it will do MUCH of this for you. Here's the pic

Expert:  Lane replied 7 months ago.

Hi,

...

I’m just checking back in to see how things are going.

...

Did my answer help?

If this HAS helped, and you DON’T have other questions … I'd appreciate a positive rating (using the stars or faces on your screen, and then clicking “submit")

...

But again, let me know if you need more on this.

Lane