I own a few rental properties, should i use schedule C or schedule E? what are the advantages/disavantages of both?

[NayJack713]

But I can claim depreciation on a property that isn't owned?

[tagteam]

---

@NayJack713 wrote:

But I can claim depreciation on a property that isn't owned?

---

@NayJack713 

See https://www.irs.gov/publications/p946#en_US_2020_publink1000107299

[Critter-3]

You still own the property  when you have a "rent to own" situation ...  until the deed changes names you still own the property.  Part of the rent is being set aside for the down payment ... seek local legal assistance if you don't understand the situation you are in and/or to help set up the contract correctly.  

[NayJack713]

@Critter-3 thank you so much for your responses! Just to clarify one thing, if I am not the owner, but the one leasing property from the owner under a lease to own arrangement, but I am renting property out as income generating, can I still report on Schedule E? From Pub 946, looks like I cannot claim depreciation since I don't retain the incidents of ownership. 

[Critter-3]

Well that is a horse of a different color ... we were posting answers as if you were the actual owner not the renter.

So you are renting a place you do not yet own ... in that case you have nothing to depreciate since you don't own the property yet. 

[NayJack713]

Yeah...just trying to determine if I can still report rental income on Schedule E.  Appreciate your guidance!

[Critter-3]

Unless you are in the business of renting out properties you do not own then it still goes on the Sch E. 

[jeanwangard]

Check the irs.gov for the definition of a "Real Estate Professional".  If you meet the criteria then your rental real estate activities are a business not "rental activity".  There may be some advantages to you using a Schedule C (you can set up a Individual 401k, deduct all office expense etc., deduct depreciation as active vs. passive loss) but the criteria is very specific and expect an audit so you put ducks in a row ahead of time.    

[tagteam]

---

@jeanwangard wrote:

Check the irs.gov for the definition of a "Real Estate Professional".  If you meet the criteria then your rental real estate activities are a business not "rental activity".  There may be some advantages to you using a Schedule C......

---

If a taxpayer qualifies as a "Real Estate Professional", the taxpayer is still required to materially participate in the rental activities.

Further, the taxpayer, as a real estate professional, would not report on Schedule C unless the taxpayer provides substantial services to renters or is a real estate dealer. 

Real estate professional status plus material participation merely transforms passive losses from rental activities into nonpassive losses.

[Peechabull]

Carl, cleaning and repairs getting a property ready to rent are 1000% deductible 

[Critter-3]

@Peechabull  

If you buy a rental that is empty and you spend money to make it ready to rent then those costs are added to the cost basis of the property and is depreciated not expenses.

But  if you have a ongoing rental concern  and in-between renters you do some repairs then those are deductible expenses however any improvements must still be capitalized. 

[thecraigs4]

I have a vacation condo.   I stayed there 84 days.  I rented it 133 days.   This made the income to not be considered passive income due to my length of stays there.  I have a loss. I do not materially participate in running the condo.   A property management company does that.  I thought that I should use Schedule E for Vacation Home Rentals.  However, TurboTax agents stated that I should put it on a Schedule C as a business.  Is this correct?  This would mean that losses can be claimed in the current year against other nonpassive income and future profit may be subject to self-employment tax.  Is Schedule C the correct way to report this?

[Critter-3]

Unless you run the property as a B&B that you work yourself  the vacation rental always goes on the Sch E. 

[thecraigs4]

Turbotax will not let there be a loss carryforward for this non-passive activity rental of my "home condo".  Is there a certain box that I need to mark so that it calculates correctly?

[Critter-3]

It is not non passive ... a rental on the Sch E is always considered passive income.  Read thru that section again.