Rental Property Questions

[ssyw]

Hello,

We purchased a townhome in 2024 to rent out. I have several questions related to this:

1. We didn't start a separate business to acquire this property so we would file under our own name for business?

2. We hired a management company which gave us a 1099 MISC for the income received. This part confuses me. Do I need to report this under my personal income because of the 1099 MISC form? If so, is it possible to report the renovation, management company fees, and other expenses somehow? 

Thank you in advance for your help! I may have many follow-up questions as well. 🙂

[PatriciaV]

1) Yes, you can report this rental activity on your personal tax return. This information is entered under Rental Properties and Royalties, which results in Schedule E being added to your return.

2) Form 1099-MISC represents your rental income, which is entered in the Rental Income section and not under the 1099-MISC topic. 

3) Yes, you should report all related Rental Expenses, including the management fees. Any renovations that improved the property would be reported under Assets/Depreciation as a separate entry from the residence itself.

Additional Information:

• Where do I enter income and expenses from a rental property?
• What kinds of rental property expenses can I deduct?
• How do I handle capital improvements and depreciation for my rental?

[ssyw]

That is very helpful. Thank you so much!

[ssyw]

I purchased this rental property in 2024. I thought I would be prompted to put in the value of the home under business expense as a depreciation? Is that correct or do I only put in the renovation costs as depreciation? 

Thank you in advance for your help.

[AmyC]

Yes, you need to add the house as an asset, land does not depreciate so it is not included in the figure.

[ssyw]

Thank you! So how would I figure out the cost of the home vs the land and where do I find the asset button? Is it under Business Expense?

[AmyC]

On your review your rental summary screen, select assets. The land value is often assessed as part of the property tax. Check local records, usually online.  You may need to ask the realtor.

[ssyw]

Thank you for your prompt reply and for that screen shot. However, my program must be a little different because I purchased the Home and Business Turbo Tax, so I don't have one specifically called Assets. I only see Business Income and Expenses, Rental Properties and Royalties, etc. Even under Business Income and Expenses though, I don't see anything like Assets. Where can I find that in my program?

Thank you in advance!

[ssyw]

I'm sorry; I did find something called Business Assets. Is this where I input the information?

[AmyC]

Yes, business assets! Good job!

[ssyw]

You're so encouraging. Thank you! But now I'm stuck again. :( 

When I add, add Asset, I chose Real Estate Property. But my only 3 options thereafter are: Nonresidential, Qualified Improvement, and Specific Qualified. Which one do I choose and how do I indicate that this is the first year purchase of this residential property for rental purposes?

[AnnetteB6 · Accepted solution]

Be sure that you are in the Rental Properties and Royalties section instead of the Business Income and Expenses section.  Based on the description of the choices you are seeing on the screen, you seem to be in the wrong place.  

Unless you are providing personal services to your renters, you do not report rental income and expenses on Schedule C (the Business Income and Expenses section).  You should be reporting it on Schedule E (the Rental Properties and Royalties section).  

Here is a screenshot from TurboTax Home and Business for visual reference:

As you start going through the Rental Income and Expenses section, many of your questions will probably be answered.  But, feel free to ask here as well.

@ssyw 

[ssyw]

Thank you so much; that was the biggest problem for me! 

Now that I'm in the correct section, could you help me through some of the questions? I found the land value for the property so I've input that amount. What do I put as the Improvement Value? It seems like this is where they are taking depreciation so I want to make sure I put in the correct amount. Do I use the purchase price plus renovations made within the interior?

Thank you again so much for your help!

[JamesG1]

The improvements to the real property would be the cost basis of the structure separate from the value of the land that the structure sits on.

If you purchased a townhome for $200,000 and paid $25,000 to renovate the kitchen, the cost basis reported for purposes of depreciation is $225,000.

[jimro]

Residential Rental Property can be reported on Schedule E in accordance with IRS Pub 527.  On Schedule E you will report rental income, as well as deductions for management fees, insurance, mortgage interest, depreciation, taxes, supplies, repairs, HOA fees, assessments, and other expenses.