Is a rental property considered my business

[PatriciaV · Accepted solution]

Renting a residential property is considered "passive activity", which means it is a side-business that doesn't require paying self-employment taxes. However, many people generate a full-time income from their rental "business."

Rental activity is reported on Schedule E, while a self-employed business is reported on Schedule C.

[Karen Ambler]

Does owning rental property mean I have to send 1099 forms to contractors who do repairs on the properties?

[GiseleD]

Possibly. It largely depends on the payee and the amount paid. If the contractor(s) you used were not corporations (S-corporations or C-corporations), it is recommended that you report the payment on a 1099-MISC. Generally, payments to a corporation (including a limited liability company [LLC] that is treated as a C or S corporation) do not need to be reported on a 1099-MISC.

However, according to the IRS’s guidance here, if you made the following type of payment, it is recommended that you report it on a 1099-MISC:

• Services performed by independent contractors or others (not employees of your business) of at least $600

However, even though you are acting as a landlord, it is important to file a 1099-MISC if you are looking to take the (up to) 20% Qualified Business Income (QBI) deduction. This deduction is available to individuals and owners who seek to claim the deduction with respect to a rental real estate enterprise. A rental real estate enterprise will be treated as a trade or business for purposes of the QBI deduction if certain criteria are met. Here is some more information from the IRS on the QBI deduction.

@Karen Ambler

[Carl]

If you paid "AN INDIVIDUAL" more than $600 during the tax year, you would need to send them a 1099-MISC. If you paid "AN INCORPORATED BUSINESS" more than $600, then no 1099-MISC is required.

For the most part, a rental property owner is not required to issue a 1099-MISC since it's passive activity. But there are exceptions.