How to start and file taxes for rental properties?

[Crgroadrebel88]

Hey there

In 2022 i want to start buying single family homes and possibly triplexes and renovate them and rent them out to other people. I want to setup a network of homes & my goal will be 5-10 to start.

my question is do i need to start a whole new business if I already have a sole proprietor setup currently under my gym business?

Also what is the best route to file as for when i start buying properties and renting them out? 

If you can please link some additional information so i can learn the best strategies for leverage my money as well as protecting it from taxation.

I want to produce eventually have 100s of homes as rental properties to create a surplus of cashflow so my family and I can create generational wealth to provide for our family and my kids.

thank you for your help! 

[AdamNe]

Hello @Crgroadrebel88 , great question! 

If you meet the following criteria: 

• More than half of the personal services you perform in all trades or businesses during the tax year are performed in real property trades or businesses in which you materially participate.
• You perform more than 750 hours of services during the tax year in real property trades or businesses in which you materially participate.”

Then you will file a distinct Schedule C for your business buying/renovating/renting out rental properties. In general, you will consider all the property you own to be business assets, and the rental income will be considered business income. Here is a link with information geared toward real estate professionals: https://turbotax.intuit.com/tax-tips/self-employment-taxes/tax-tips-for-real-estate-agents-and-broke... 

If you do not meet both of the criteria above, your activity renting out the property will be claimed on Schedule E as passive rental income. Here is a great link that describes in great detail how passive rental property income is taxed and all the tax implications: https://turbotax.intuit.com/tax-tips/rental-property/real-estate-tax-and-rental-property/L3e09vT71

Either way, rental property is a great income source and good on you for chasing your dream!