1. This is my only primary condo and I was living here till Aug 21, 2019. I advertised it for rent on FB, Craigslist in June and started renting out from Aug 21, 2019 to 2 girls (2 separate lease).
This tells me that you filed SCH E with your 2019 return, as well as your 2020 and 2021 tax return. For each of those years you should also have an IRS Form 4562 that shows depreciation of the property itself at an absolute minimum.
2. I made some Property improvements before Aug - bathroom remodel, kitchen update around 20,000.
The cost of those improvements should already be included on the 4562 in the "Cost (Net of Land)" column for the property. They can be added to the structure cost since they were completed before you converted the property to a rental. However, they very well could be listed separately on the 4562 with the same exact "in service" date as the property itself. I would expect them to show 27.5 years in the "Life" column" and SL/MM in the "Method/Convention" column. But it could be different if you have new kitchen appliances that were classified separately as appliances instead of residential rental real estate.
3. Maintenance - been paying handymen on and off for basic repairs toilets, fridge, washer etc. I buy the parts and they repair for a fee.
Those costs would be listed for what they are - either maintenance costs or repair costs. If you'll take a look at the SCH E, you'll see that line 7 is for "cleaning and maintenance" and line 14 is for "repairs". Typically, cleaning/maintenance costs and some repair costs are incurred between renters, while repair costs are almost always incurred for things done of that nature while the property is occupied. Now if you pay any one individual or unincorporated business more than $600 in a year, you should issue them a 1099-NEC for the total amount you paid that individual or unincorporated company during the tax year. Though it may not be required, it helps support any claim you may have to qualifying for the 20% Qualified Business Income (QBI) deduction. TurboTax can help with this if necessary.
I have a HOA fee $520/month includes landscaping, gardener, common pool maintenance, outside painting, decks, water, garbage, earthquake and roof insurance etc. - can this be included in my maintenance?
I always enter my HOA fees as "other" expense so that I can label it for what it is. (i.e. HOA Fees - $$$$). You should check and see if the HOA is incorporated. Most are. But you should confirm it. If they are incorporated as an S-Corp or C-Corp then you don't need to bother with issuing an 1099-NEC. Just make sure your payments show as being paid to the corporation, and not to an individual.
4. In between renters - I have got the condo cleaned by cleaners for a fee.
That would be a deductible cleaning and maintenance expense. As a reminder, if you pay them more than $600 in the tax year, you can issue them a 1099-NEC. But as stated earlier, if the business you pay for this service is incorporated as an S-Corp or C-Corp then the 1099-NEC is not required.
5. From 2019 till date I have filed using a tax preparer because I was not sure how to handle this rental situation.
I take it that the 2022 tax return will be your first that you complete youself, as well as your first time using the TurboTax program. Like I said earlier, it's not like you learn this stuff through osmosis. You "are" going to screw it up and need to start over a few times. That's why I highly recommend you purchase the CD/Download version of the program.
In 2021 she filed Sch E - Expenses include Auto, Home Insurance (which I read your advice- I should change to Rental dwelling Ins), Mortgage interest, repairs, Taxes, Utilities that I am paying (internet etc), Depreciation Expense -
Normal and expected rental expenses. But you may want to look at the vehicle expenses being claimed on the SCH E. Is it really worth it? When you sell, trade in or otherwise dispose of the vehicle, it creates additional work at tax filing time. For some it's worth it. For me its not. (I have three rentals). So I don't claim any vehicle expenses for any of my rentals.
with a loss of around 10,000 on line 21.
While not unheard of, it is not common for long term residential rental real estate to show a profit "on paper" at tax filing time. When you add up the deductible expenses of mortgage interest, insurance, property tax and the depreciation you are required to take by law, those four items alone will usually be more than the rental income received for the entire tax year. Add to that the other deductible expenses (HOA fees, repairs, maintenance, etc.) and you're practically guaranteed to show a loss "on paper" at tax time, every single year.
6. Also filed in 2021 Form 4562 Depreciation and Amortization with MACRS Depreciation about 14K (included in Sch E).
All part of the process.
7. Form 8582 Passive Activity Loss Limitations - she added the 10K net loss from Sch E, Prior years unallowed losses 2K, total 12K loss.
All part of the process.
8. I filed for DBA with EIN because I thought I can use all these expenses like buy a car, laptop, gas, repairs, rent where I am currently living, etc as deductions and reduce my taxes further. But I suppose these are all going into my Sch E and I cannot use the DBA for this?
It makes absolutely no sense to put a single residential rental property into a business. For starters, as the only owner of the business the IRS considers your business to be a disregarded entity - meaning that income earned by the business is no different than W-2 income earned by you. A disregarded entity files a SCH C as a part of the business owner's personal 1040 tax return. Since rental income is passive income, absolutely nothing what-so-ever would be reported on SCH C concerning the rental property. It "still" gets reported on SCH E. So establishing a separate business for the rental is a complete waste of time and money (in your specific and explicit case.)
9. If I want to buy another property and rent it out will I be able to use this DBA?
Why? There's cost associated with doing that, and no benefit to realize from it. I have three rentals myself which I report on SCH E. I see no reason or need for a separate business for the rentals.
I thought I could get additional deductions using DBA and it would be better for my taxes - because many friends doing different businesses advised me so.
Either your friends are misinformed, or they're not telling you the whole story behind their reasoning and their reasoning just flat out does not apply to your specific situation.
Now you'll hear stories about landlord liability. Some will put rentals into an S-Corp so as to protect their personal assets should they ever be sued by a tenant and lose. I myself find it significantly cheaper and much less hassle to just increase my liability coverage on my rental dwelling insurance policy from the standard $300K of coverage, to $1M of coverage. It only costs me an extra $100 a year to do that. Without question that is significantly cheaper and "no" hassle what-so-ever to go the insurance route, than it is to deal with all the federal and state requirements for establishing and maintaining an S-Corp.
Again I appreciate all your advise - it is so helpful for me starting off.
Just to provide you further clarification about issuing 1099-NECs, since being a landlord is not your primary business or primary source of income, you are not required to issue a 1099-NEC regardless of the amount. It's also not required so you can qualify for the 20% QBI deduction. However, I recommend you issue 1099-NECs for amounts greater than $600 to an individual or unincorporated business, as it may help support any claim you may make for the 20% QBI deduction. To give you an idea of what I'm talking about with QBI, see https://www.irs.gov/newsroom/irs-finalizes-safe-harbor-to-allow-rental-real-estate-to-qualify-as-a-b...
I would like to make a suggestion if it's within your budget - not just the money budget, but your time budget also. I assume you have a paper copy of your completed and filed 2021 tax return that includes all the worksheets and calculation forms. If not, then contact the CPA and get a complete copy of the return now. Don't wait until tax filing time to do this, as the CPA will be to busy with paying clients and probably won't give you the time of day.
If so, I'd expect it to be about 50-60 pages or so. Go ahead and purchase the CD version of TurboTax 2021 and lets "recreate" your 2021 tax return using the 2021 version of the TurboTax program. This will help you learn so that you're not in a hurry and are not stressing over your tax return. You'll be able to use your printed copy of the 2021 return to "fill in the blanks" in the Turbotax program. The goal is to get the TurboTax return to match your CPA prepared return "exactly".
Also, as a first time user of the TurboTax program, that first time can be a real time consuming bear. That's because you have to enter *E*V*E*R*Y*T*H*I*N*G* one keystroke at a time. After that, for subsequent years the program will import the common data from the prior year's tax return file. Things like names, addresses, rental property, depreciation amounts, etc.
If you don't want to go this route, that's fine. Just don't wait until the last minute to do those 2022 taxes, or you'll risk putting yourself in a real bind not only to get it filed on time, but to get it completed "correctly".
