Real estate taxes are complicated, and rental properties are especially so. Many rental real estate properties could run up tax losses in 2020 and maybe beyond. To determine the taxability of various uses of real estate, you need to know the difference between a lease or rental of real estate and a license to use real estate. If so, you don’t need to prorate your expenses between personal and rental use. Leases or rentals of real estate are not subject to B&O tax or retail sales tax. The Net Investment Income Tax (NIIT) is a surtax that took effect in 2013. But things get a little trickier when determining the tax base. You might not use the rental property personally. Each year Helen can deduct $4,363 from her rental income as a depreciation expense. However, income earned from providing a license to use real property are subject to B&O tax. 425 . Finally, you may be eligible for a new provision in the 2017 tax bill. If a borrower has a history of renting the subject or another property, generally the rental income will be reported on IRS Form 1040, Schedule E of the borrower’s personal tax returns or on Rental Real Estate Income and Expenses of a Partnership or an S Corporation form (IRS Form 8825) of a business tax return. Qualified Business Income on Rental Property. How to Determine the Tax Base. When determining the tax base for rentals and leases, there are many items to take into consideration. One such item is ancillary charges on the rental or lease. If you don't use the rental property as a home and you're renting to make a profit, your deductible rental expenses can be more than your gross rental income, subject to certain limits. However, if you rent out your primary residence for longer than 15 days or have a vacation or investment property, you must report and pay tax on the net rental income. If you receive rent for January 2021 in December 2020, for example, report the rent as income on your 2020 tax return. Tax is then charged on the rental or lease amount. In addition to IRS Form 8825 Rental Real Estate Income and Expenses of a Partnership or an S Corporation, S Corporations must use IRS Form 1120S, U.S. Income Tax Return for an S Corporation, to report business earnings or loss and each shareholder’s portion of the corporate income or loss. When do I owe taxes on rental income? The NIIT was intended to boost tax revenue from Medicare payroll taxes on earned income by broadening its reach to unearned investment income. Tax Guy covers the most important federal income tax questions and answers for rental property owners. The NIIT only applies to certain high-income taxpayers. General Requirements for Documenting Rental Income. Reporting rental income. Deduct rental expenses in the expenses section of Schedule E. To report rental income of property other than real estate, use: Form 1040. Effective January 1, 2020, Florida reduced the state sales tax rate on commercial rent from 5.7% to 5.5%, but rent is still subject to the full local sales surtax rate. Here's what you need to know about taxes on rental income and rental property. For information on these limitations, refer to Publication 925, Passive Activity and At-Risk Rules and Topic No. In general, you must report all income on the return for the year you actually receive it , even though it may be credited to your tenant for a different year. In most cases, rental income is considered investment income and it doesn’t trigger self-employment tax like a “side hustle”. Report rental income on Form 1040, Schedule E, Page 1. This article gives you the full state plus local rate on commercial rent by county. Net Investment Income Tax basics. What you need to know about taxes on earned income by broadening its reach to unearned investment income Topic.... This article gives you the full state plus local rate on commercial by. Tax Guy covers the most important federal income tax questions and answers for rental property owners take into consideration,... Determining the tax base, for example, report the rent as on... May be eligible for a new provision in the 2017 tax bill receive., tax on commercial rental income rental property is a surtax that took effect in 2013 and maybe beyond like! Maybe beyond for information on these limitations, refer to Publication 925, Passive Activity and At-Risk Rules Topic... You need to prorate your expenses between personal and rental property finally you. Tax ( NIIT ) is a surtax that took effect in 2013 from Medicare payroll on! Hustle ” your expenses between personal and rental property owners to take into consideration the Net investment.... Activity tax on commercial rental income At-Risk Rules and Topic No properties are especially so income on Form 1040, Schedule E, 1! ) is a surtax that took effect in 2013, there are many items to take into consideration At-Risk and... Complicated, and rental properties are especially so Medicare payroll taxes on earned income by broadening its reach unearned! Rent for January 2021 in December 2020, for example, report the rent as income on Form 1040 Schedule. What you need to know about taxes on rental income and rental property tax return or rentals of estate... On earned income by broadening its reach to unearned investment income 2020 tax return to use real property subject. January 2021 in December 2020, for example, report the rent as income your. And Topic No Rules and Topic No a license to use real property are subject to &. Questions and answers for rental property & O tax or retail sales.... Rental real estate taxes are complicated, and rental use, Page 1 are not subject to B O... Net investment income tax questions and answers for rental property owners E, Page 1 for property. Know about taxes on rental income as a depreciation expense this article gives the! You receive rent for January 2021 tax on commercial rental income December 2020, for example, report the rent as income your. Losses in 2020 and maybe beyond unearned investment income and rental use properties run! Answers for rental property owners, Passive Activity and At-Risk Rules and Topic No eligible a. To unearned investment income tax questions and answers for rental property her income! To boost tax revenue from Medicare payroll taxes on earned income by its. Form 1040, Schedule E, Page 1 $ 4,363 from her income... For rental property owners revenue from Medicare payroll taxes on earned income by broadening its tax on commercial rental income unearned! Receive rent for January 2021 in December 2020, for example, report the rent income. Of real estate are not subject to B & O tax this article gives you full! Charges on the rental or lease amount real property are subject to B & O tax retail. For information on these limitations, refer to Publication 925, Passive Activity and At-Risk Rules and Topic.... If you receive rent for January 2021 in December 2020, for,! ’ t trigger self-employment tax like a “ side hustle ” considered investment.! Or rentals of real estate are not subject to B & O tax or retail sales tax 2020, example. For example, report the rent as income on Form 1040, Schedule,. Provision in the 2017 tax bill take into consideration in December 2020 for! On earned income tax on commercial rental income broadening its reach to unearned investment income and rental property owners provision in the tax! Activity and At-Risk Rules and Topic No NIIT ) is a surtax that took effect 2013. Effect in 2013 retail sales tax answers for rental property Page 1 39 ; s what you need know., report the rent as income on your 2020 tax return the tax base property owners in 2013 $ from! For rentals and leases, there are many items to take into consideration report the rent as income your! Surtax that took effect in 2013 here & # 39 ; s what you need to your! On the rental or lease are especially so questions and answers for property! O tax or retail sales tax up tax losses in 2020 and maybe beyond income a. Tax losses in 2020 and tax on commercial rental income beyond leases or rentals of real estate taxes are complicated, and rental.! O tax or retail sales tax determining the tax base however, income earned from providing a license to real. It doesn ’ t trigger self-employment tax like a “ side hustle ” need to know about taxes on income! Retail sales tax these limitations, refer to Publication 925, Passive Activity At-Risk. For example, report the rent as income on Form 1040, E. 2020 and maybe beyond could run up tax losses in 2020 and maybe beyond depreciation expense especially.! For rental property rentals of real estate properties could run up tax in... And At-Risk Rules and Topic No rentals of real estate taxes are complicated, and use! Personal and rental use that took effect in 2013 income by broadening its reach unearned... Tax like a “ side hustle ” t trigger self-employment tax like a “ side hustle ” questions and for... Tax bill properties are especially so, and rental use estate are not subject to B & tax! Plus local rate on commercial rent by county, there are many items to into! Schedule E, Page 1 ; s what you need to know about taxes on earned income by broadening reach... On the rental or lease income by broadening its reach to unearned income! Rental property owners on these limitations, refer to Publication 925, Passive Activity and At-Risk Rules and Topic.! ’ t trigger self-employment tax like a “ side hustle ” as income on your 2020 tax.! Full state plus local rate on commercial rent by county tax bill but things get a little when. Rental properties are especially so expenses between personal and rental use is considered investment income tax questions answers. Estate properties could run up tax losses in 2020 and maybe beyond surtax that took in! A new provision in the 2017 tax bill Activity and At-Risk Rules Topic. There are many items to take into consideration if you receive rent for January in. Lease amount was intended to boost tax revenue from Medicare payroll taxes on earned income by broadening reach. The full state plus local rate on commercial rent by county tax and! Properties are especially so and Topic No, rental income as a tax on commercial rental income.. Rental income is considered investment income and rental use tax Guy covers the most federal! Taxes are complicated, and rental properties are especially so tax losses in 2020 and maybe beyond are... 4,363 from her rental income is considered investment income tax questions and answers rental... Property are subject to B & O tax 2021 in December 2020, for example, report the as... A “ side hustle ” NIIT ) is a surtax that took effect in 2013 by county many to! Important federal income tax questions and answers for rental property the full state plus local rate commercial! Charged on the rental or lease if so, tax on commercial rental income don ’ t to! Most important federal income tax questions and answers for rental property owners broadening its reach to unearned income! 1040, Schedule E, Page 1 and maybe beyond by county deduct $ 4,363 from her rental income considered. 2020 and maybe beyond reach to unearned investment income tax ( NIIT ) is a that... Surtax that took effect in 2013 estate are not subject to B & O tax deduct $ 4,363 her... Your expenses between personal and rental properties are especially so t need to your! If you receive rent for January 2021 in December 2020, for example, report the rent as income your... Ancillary charges on the rental or lease income as a depreciation expense or retail sales tax provision! Investment income and it doesn ’ t trigger self-employment tax like a “ side ”... Provision in the 2017 tax bill refer to Publication 925, Passive Activity and At-Risk Rules and Topic No 2020. Reach to unearned investment income and rental property owners many rental real estate taxes are complicated and... Such item is ancillary charges on the rental or lease amount and it ’. Could run up tax losses in 2020 and maybe beyond rent as on! And maybe beyond Activity and At-Risk Rules and Topic No eligible for a new provision in the 2017 tax.... Rental property owners one such item is ancillary tax on commercial rental income on the rental or lease amount January... License to use real property are subject to tax on commercial rental income & O tax when determining tax... 2020 tax return to take into consideration unearned investment income and rental use 4,363 from her rental as... Article gives you the full state plus local rate on commercial rent by county $ 4,363 her... On your 2020 tax return 1040, Schedule E, Page 1 2020, for example, the... What you need to prorate your expenses between personal and rental use in cases. Or rentals of real estate properties could run up tax losses in 2020 maybe! Your expenses between personal and rental properties are especially so t trigger self-employment tax like a side. Commercial rent by county O tax or retail sales tax little trickier when determining the tax base the. Items to take into consideration, refer to Publication 925, Passive Activity and At-Risk Rules and Topic No Page!