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Schedule C vs. Schedule E Question

I am in the buy and hold rental business, I do full rehabs then place a tenant.  In the past I've done Schedule E and I am becoming quite an all star in the realm of deductions and depreciations, I even caught a mistake I made last year and refiled! 

 

But, now my business is getting bigger, I'm on my sixth rental now.  This time, I 1099'd so many people that I got worker's comp insurance.  Now, I want to make sure I can claim the following business related expenses, which I haven't claimed in the past (just a few examples): 

 

-Printer

-Cellular service

-Tax services (e.g. numreceipt) 

-Security cameras 

-IT services

-Workers Comp Insurance 

-Professional Services

 

So, my questions are 

 

-Can I place all these expenses in Schedule E? If so, where should I put them? Do I spread them out on all the homes, or divide a percentage equal to the use of each home?  

-Can I create a Schedule C for these to make it easier on myself? The schedule C would only show business losses (I registered my business this year), the benefit would be the expenses that apply to the entire business are all in one place.  I would prefer this because if I sell one of my homes and they happen to have my depreciated asset, then I loose all the future depreciation on that item (such as a mobile security camera system).  Having a separate schedule C may also help me get approved for larger loans, as it may reduce my Debt-to-Income ratio, since the lenders may not look at Schedule C when verifying income.  

-Is there any scenario where a real estate professional (I work 1000's of hours in RE, on top of my day job, I am a work-a-holic) would benefit from putting all of their rental assets and rents into a schedule C instead of E?  

 

Thanks! 

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3 Replies
Anonymous
Not applicable

Schedule C vs. Schedule E Question

since they're related to a for profit activity you can deduct them on schedule E.  how you allocate them is up to you.  evenly, based on revenue or any other logical way.   the problem with putting them on schedule C is one, this is misreporting ,  second, continuous schedule C losses could result in you being audited.   

 

the only item  that should be specifically allocated is the security cameras. bonus deprecition as you know would allow full deprecition in the year put into service.  should you sell a property and have them on schedule C.  your going to create a headache for yourself. 

 

as to real estate pro, they still report on schedule E not schedule C.  do you really want to pay self -employment tax (schedule C reporting)?  

 

 

to claim to be a real estate pro

(i)more than one-half of the personal services performed in trades or businesses by the taxpayer during such taxable year are performed in real property trades or businesses in which the taxpayer materially participates, and
(ii)such taxpayer performs more than 750 hours of services during the taxable year in real property trades or businesses in which the taxpayer materially participates.
In the case of a joint return, the requirements of the preceding sentence are satisfied if and only if either spouse separately satisfies such requirements. For purposes of the preceding sentence, activities in which a spouse materially participates shall be determined under subsection (h).

Schedule C vs. Schedule E Question

Thanks! I'll go with Schedule E.  Should the rest of the items I mentioned (workers comp, etc.) items be spread out between all properties, or should I put them on the most relevant property?  

 

I am most def. a RE Pro.  

 

I'm looking at strategies to minimize my debt-to-income DTI ratio because I need a big loan coming up.  Any strategies for schedule E to minimize what the lenders consider for DTI impacts? 

Carl
Level 15

Schedule C vs. Schedule E Question

Take note that if you purchase a property and sell it in the same tax year, you are not required to take depreciation.

I do note that you say "I" do this. Are you by yourself in this endeavor? Or do you have a partner? I ask, because there may be other alternatives that you may want to at least be aware of, for consideration. Possible alternatives may or may not help on the tax front. But you won't know until you know what those alternatives are. But before you can even consider them, it would require that more than just you be involved/invested in this. If you are married, then this endeavor can most certainly include your spouse. It also matters what state you are in.

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