What documents do landlords need to prepare for taxes?
Having the right documents and records on hand when it comes time to file your year-end tax return can streamline the process for everyone involved. As a rental property owner, you can prepare for tax time by gathering the following documents:
- Prior years' tax records.
- Tenant leases.
- Property titles or deeds.
- Legal documents, such as incorporation records and inspection reports.
- Business insurance policies.
- Receipts for rent payments.
- Records of security deposits.
- Documentation of expenses, including marketing, mortgage interest, repairs, maintenance, landlord-provided utilities, service fees, office expenses, etc.
- Payroll expenses if you have employees or independent contractors.
- Business travel expenses.
What are the important tax deadlines remaining for 2023 and 2024?
Most tax deadlines for 2023 have already passed. The final deadline for paying 2023 estimated quarterly taxes for the fourth quarter is Jan. 16, 2024.
The deadline for filing 2023 year-end tax returns is April 15, 2024. Quarterly estimated tax payments in 2024 for small business owners, including rental property owners, will be due:
- April 15, 2024.
- June 17, 2024.
- Sept. 16, 2024.
- Jan. 15, 2025 (for the fourth quarter of 2024).
Depending on your business structure and whether you have employees or independent contractors helping with property management or other tasks, there may be additional tax deadline considerations.
Can landlords deduct losses related to missed rent payments by tenants?
The answer depends on whether you report taxes on a cash basis or accrual basis. Under the accrual method, you report income and expenses when due and may deduct uncollected rent.
On a cash basis, you report income upon receipt and expenses upon payment. As a result, the IRS says you cannot deduct uncollected rent if you are a cash basis taxpayer. You may, however, have other deductible expenses related to missed rent payments, such as legal expenses incurred in trying to collect unpaid rents.
Does forming a business entity make taxes easier for landlords?
A separate, legal business entity for your rental property business can help keep your business and personal income separate. In addition to personal liability protection, there are also several potential tax advantages to forming a business entity.
Forming an LLC or corporation can minimize the risk that your business earnings will push you into a higher personal income tax bracket. In addition, you may take advantage of business-specific tax credits and tax deductions for ordinary and reasonable business expenses not available to individual taxpayers. Tax advantages may vary depending on the type of business entity. If you have more questions about whether forming a business for your rental property business makes sense, reach out to a Rocket Lawyer network attorney for affordable legal advice.
If you change your business type in the middle of a tax year while operating your rental property business and earning income, you may need to file two separate tax returns for your business in that year.
Whether you've been leasing property for decades or a few months, taxes can be confusing. The right tax help can help you remain in compliance with changing IRS regulations.
This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.
