I completed an amended tax return because I didn't know how to report rental income. I collected $13,000 and owe $4,500 in taxes. I was wondering how that's calculated.

[MichaelL1]

Did you take depreciation on the rental?

Any expenses?

[trevorjharrison2]

There was no depreciation or expenses.

[MichaelL1]

OK I am going to put information below on doing a Rental and then you might want to call us --Do not mail the Amended return in until it is correct.

[MichaelL1]

You are going to end up upgrading to Premier but the rental needs to be set up correctly.

Please see this link.  https://ttlc.intuit.com/questions/4025922-i-need-to-start-a-schedule-e-for-rental-income-expenses

In addition to deprciaiton look at some of the expenses you can deduct.

The IRS lets you deduct ordinary and necessary expenses required to manage, conserve, or maintain property that you rent to others. You're allowed to deduct these expenses if your property is vacant, as long as you're trying to rent it.

Also, expenses must be deducted in the year they are paid. For example, if a pest-control company serviced your rental in 2018 but you didn't pay them until early 2019, you'd deduct that expense on your 2019 tax return.

Deductible expenses include, but are not limited to:

• Cleaning and cleaning supplies
• Maintenance and related supplies
• Repairs
• Utilities
• Insurance
• Travel to and from the property
• Management fees
• Legal and professional fees
• Commissions
• Taxes and tax return preparation
• Lease cancellation costs
• Advertising
• Real estate taxes
• Mortgage interest
  • Refinance fees and mortgage points are entered in the Assets/Depreciation section instead of the Expenses section. The IRS considers these "amortizable intangibles" which means they must be depreciated, not expensed.

[trevorjharrison2]

Ok thank you.

[MichaelL1]

Most rentals actually have a loss when depreciation is taken into account.

[trevorjharrison2]

how is depreciation figured?

[MichaelL1]

Need to know cost of building, and how much is building versus land.  I will send an example to look at

[MichaelL1]

how do I calculate depreciation?

Depreciation is a deduction taken over several years. You generally depreciate the cost of business property that has a useful life of more than a year, but gradually wears out, or loses its value due to wear and tear, weather damage, etc. To figure out the depreciation on your rental property:

    Determine your cost or other tax basis for the property.
    Allocate that cost to the different types of property included in your rental (such as land, buildings, so on).
    Calculate depreciation for each property type based on the methods, rates and useful lives specified by the IRS.

[MichaelL1]

Capital improvements that add to the value of your rental property, prolong its life, or adapt it to new uses must be depreciated over a period of time rather than deducted as a current-year expense. This would include things like:

    Remodels and room additions (including decks and porches)
    New or upgraded landscaping, irrigation, sprinkler system
    Landscape such as pavement, block or retaining wall, patio
    Fencing
    Swimming pool, spa
    Storm windows, doors
    New roof
    Central vacuum or security system
    Upgraded wiring, plumbing, duct work
    Central heating, AC, humidifier
    New furnace, water heater
    Filtration, soft-water, or septic system
    Built-in appliances
    New flooring or wall-to-wall carpeting
    Upgraded insulation
    Satellite dish

In other words, if you spent $8,000 on a new roof last year, the IRS won't let you deduct the entire $8,000 from last year's rental income. Instead, the $8,000 must be depreciated, which means you deduct it over a period of time instead of all at once.

To enter your rental improvements, simply follow the directions to enter your rental income and expenses. At some point you'll come across the Rental Summary screen. Select Start next to Asset/Depreciation and follow the onscreen instructions. We'll figure out which depreciation method works best in your favor.