Do I pay self employment tax if I only receive military retirement pay and rental income from a property owned by my LLC in MD and from a duplex I live in in MI?

[twcroy]

Also, I should receive my 2016 military retirement pay shortly as retroactive pay this month. I just received my normal monthly retirement payment beginning in March 2017. Retroactive pay goes back to July 18, 2016. I was not able to rent the unit in the duplex during 2016, but I should rent it in 2017. Thank you in advance for your help.

[ChristinaS · Accepted solution]

No, you don't pay self-employment tax on rental income. But you do claim rental income and expenses for the LLC. If the LLC is just you, and is composed of a rental property, ensure that you complete the info for Schedule E, not Schedule C.

There's no SE tax on Schedule E rental income.

You would file a federal 1040 with the retirement income and a Schedule E. File a nonresident Maryland return and allocate any net income from the rental (or loss) to Maryland.

Technically, you begin to report the rental income/ expenses when the property is available for rent (even if not rented). However, if you feel you weren't quite ready to rent in 2016, and so the lack of renting is for lack of effort, than don't report anything until 2017.