Is income from a rental property considered earned income?

[JavierG · Accepted solution]

If you collect rent from someone who lives in a property that you own – even if it's just a room in your house – you're considered a landlord and must report the rent you receive as taxable income.

The rent is considered income in the year you received it, even if the rent covers a time period in a different year. In other words, your tenants' rent payment for January of 2014 collected in December of 2013 gets reported on your 2013 return, but a 2013 rent payment that wasn't received until 2014 is reported on your 2014 return.

To offset your rental income, the IRS lets you deduct expenses and depreciation related to the rental. We'll show you how to enter both your rental income and expenses below.

Entering rental income and expenses

For tax year 2014, you'll need TurboTax Premier or TurboTax Home & Business to enter rental income and expenses. These versions support the Schedule E you'll need to report rental property.

First, if your rental property is located out-of-state, do this before entering your rental-related income and expenses:

1. Open your return.
2. Select Personal (Premier edition) or Personal Info (Home & Business edition) and continue to the Your Personal Info Summary screen.
3. Scroll down the Personal Info Summary screen until you see the Other State Income.
4. Click on the Edit/Update button next to Other State Income.
5. On the Did (Either of) You Make Money in Any Other States? screen, make sure you checked the box next to Yes, we made money in states other than <yourstate>.
6. Select the state your rental property is located in from the drop-down list, then click Continue.
   If your rental is located in Alaska, Florida, Nevada, South Dakota, Texas, Washington, or Wyoming, leave No Entry in the drop-down and click Continue.

This step ensures TurboTax sets up your state programs correctly when it comes time to file your state taxes. (In most cases, you'll need to file a nonresident return for out-of-state rental property. For more details, refer to Nonresident State Tax Returns)

Now let's enter your rental income:

1. Select Federal Taxes (Business in the Home & Business edition).
   In Online TurboTax Premier, click the bars at the upper left corner to show Federal Taxes on the selection list; enlarge the screen if needed to show the left side selection list. If you don't see the menu bars, you must first step through each of the interview screens in TurboTax.
2. Select Business Income and Expenses and in the next screen, click I'll choose what I work on.
3. On the Your Income Summary screen (TurboTax Premier edition) or the Your Business Income screen (TurboTax Home & Business edition), scroll down to the Rentals and Royalties group.
4. Click Start/Update next to the Rentals and Royalties line and step through the rental interviews to the Your <name> Rental Summary screen.
   If you have more than one rental entered, select the out-of-state property.
5. Click the Start/Update button next to each topic on the Your <name> Rental summary screen to enter your rental income, expenses, assets, depreciation, and vehicle expenses.

When finished, click State Taxes to get started on your state tax return(s). Don't forget to file a nonresident return if your rental property is located in a state that collects income tax.

Tip: Prepare your nonresident state return(s) before your resident return so that TurboTax can properly calculate the credit for taxes paid to another state.

Are security deposits taxable?

[monixt]

Thanks for the prompt response, but the question was whether it is considered "earned income" , I know it is taxable income but needed that info for another question in the program that asked if I had provided over half of my earned income support. Thanks anyway

[patel8399]

have you ever find out this question? if so, please answer.

[Hal_Al]

No. It is not classified as earned income, but it is still reportable and taxable.

[monixt]

Thank you.

[patel8399]

even if i have llc for all rentals, it still not consider as earn income?

[kesdesigngroup · Accepted solution]

It will only be considered earned income if you provide substantial services that are primarily for the tenant's convenience in addition to property rental, i.e., hotel like services. Otherwise, rental property income is considered passive income and therefore, not earned income. The business structure does not dictate how income is treated; the classification of income being either passive or active dictates whether income is considered earned or not. Passive income is not considered earned income. It will depend on whether or not your business generates active income.

https://www.irs.gov/taxtopics/tc414

[Carl]

Is income from a rental property considered earned income?

No. Residential Rental Property income is passive income.

If you run something such as a Bed and Breakfast, that's where you provide your tenants services on a recurring basis that are "directly beneficial to the tenant".  Exactly the same as a hotel. That would be considered earned income and reported on SCH C.

"Directly beneficial to the tenant" would include things like daily maid service, daily breakfast included with the rent payment, laundry services, etc.

But with residential rental income you don't "do" anything on a recurring basis to actually "earn" it. All you do is "sit there" and college the rent every month (or whatever the recurring pay period is.)  So that's passive income reported on SCH E.

[meebeebe]

thats not what i need help with.  where is this mythical Live Help button?  How do I get a LIve Help account?

[meebeebe]

i don'tt need help with rental property.  I need help determining which deduction/credit area i enter the cost of wiring an electric vehicle charging station in my garage goes;  does it get entered under "Home Energy Credits" or does it get entered under "Energy efficient Vehicle Charging Station"?

[Hal_Al]

@meebeebe 

Ask a new question, so it can be seen by the whole forum. You won't get much help tagging on to an old thread on a different topic

[Hal_Al]

For live help, see:

https://ttlc.intuit.com/community/taxes/discussion/how-to-contact-my-full-service-expert/00/1950947

[DoninGA]

It would be best to start a new question instead of tagging onto an unrelated forum thread.

But to answer your question the Energy-Efficient Vehicle Charging Station using Form 8911 is entered by -

• Click on Federal Taxes
• Click on Deductions & Credits
• Click on I'll choose what I work on (if shown)
• Scroll down to Cars and Other Things You Own
• On Energy-Efficient Vehicle Charging Station, click on the start button

[DiddlyD]

This question is extremely important when it comes to whether your SS income at your full retirement age is taxed based on "earned income" vs "passive income" criteria which Turbotax should ask you and determine; one (earned) will result in your SS being taxed (if the income is over a certain amount) whereas the other one (Passive) will result in your SS "not" being taxed.  In both rental income type scenarios, the rental income itself will be taxed of course, this is just about whether the SS income portion will also be taxed up to 85% or not.