Don't waste your time. With "any" kind of a loss you first have to reduce the loss by $100. No need in covering the other stuff since what you have is not deductible anyway. Besides, as of 2018 if this would be classified as a personal loss, personal losses are just flat out no longer deductible anyway.
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The 1099-MISC should reflect the money that you actually received in box 1. You need to talk with the property manager to get you both on the same page.
For now, enter the 1099-MISC *exactly* as printed. Then in the Rental Expenses section you will enter all expenses including the fees you paid to the property manager (which were in reality, withheld by the property manager.) That should get your "reportable" rental income to the correct amount. But overall, if you have a mortgage on the property you'll find in the end that none of your rental income will be taxable and you'll have excess losses to carry over to next year.
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With the online version of the program, if you will be claiming *any* business expenses, then you *have* to use the Self-Employed version.
With the Cd/Desktop program, you can use the Premier version of the Home & Business Version to file a full SCH C and claim your business expenses.
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Can I deduct the depreciation and expenses from the income to reduce my taxable income?
No. Rental income is passive. It's not earned like your W-2 income is. Passive expenses can only be deducted from passive income, and that's it. Once your rental expenses gets your taxable rental income to zero (and it will) that's it. Any remaining expenses are just carried over to the next year.
Basically, in the very first year you enter the rental property into the TTX program you will see at an absolute minimum, the property itself listed in the Assets/Depreciation section. If not, then click the Add and Asset button and work it through to add the property itself. From that point on (if you enter everything correctly) the program will take care of the depreciation *for you* automatically, in the background with each passing year. That is of course, provided you import the data from the prior year tax file.
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You can't do that with the TTX program really. But it's simple to get a rough estimate.
What you paid for the property, plus the cost of any property improvements, minus the amount of depreciation taken on the property for the entire time you owned it, will give you your adjusted cost basis.
Then subtract that adjusted cost basis from your sale price and that will give you the taxable gain. This amount will be rough, because it doesn't take into account your sales expenses which on average, are around $5K give a take a bit.
How much tax you will pay on that gain depends on whatever your total AGI will be for 2019, what tax bracket you fall in, how much depreciation is recaptured, and other incidentals that may or may not apply to you and your specific situation.
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Yes. But what flavor of Turbotax you use, depends on the type of LLC. It does matter.
Sole Proprietorship – This is a business with one owner, and only own owner. There are no other investors or share holders. This type of business is considered a “disregarded entity” by the IRS. All income and expenses for the business are reported on SCH C as a physical part of the owner’s personal tax return. Again, a sole proprietorship has only own owner. Depending on what state the business is in, registration is not required at the state level. But it may be required at the county, town, or other level of government below the state. For example, your county may require you to register and obtain a county issued Occupational License, which authorizes you to conduct business only within the jurisdiction of the authority that issued the Occupational License. This is most often required when the county, city or other authority below the state taxes personal income or imposes a tangible property tax on business assets utilized to produce business income.
Single Member LLC - This is a business with one owner, and only own owner. There are no other investors or share holders. This type of business is considered a “disregarded entity” by the IRS. All income and expenses for the business are reported on SCH C as a physical part of the owner’s personal tax return. Again, a single member LLC has only own owner. This type of business is required to be registered at the state level, weather that state taxes personal income or not. Additionally, this type of business may also be required to obtain an Occupational License for the county(s), city(s) or other more localized jurisdictions within that state, in which the business will be operating in.
Multi-Member LLC – This is a business with more than one owner. It’s also the exact same as a Partnership (for tax purposes) This type of business also has to register at the state level, and may also be required to obtain an Occupational License from more localized jurisdictions within the state, in which that business will operate. This type of business will file its own physically separate tax return with the IRS (and state if applicable) referred to as a Partnership Return, on IRS Form 1065. When completing the 1065 (using TurboTax) the business will issue each individual owner a K-1 reporting the income (or loss) of each owner. Each owner will use this K-1 to complete their personal return. So an owner can’t even start their personal return, until after the 1065 Partnership Return has been complete, filed, and all K-1’s issued to all owners.
In the community property states of Louisiana, Arizona, California, Texas, Washington, Idaho, Nevada, New Mexico, and Wisconsin if you have a multi-member LLC where there are only two owners, those two owners are legally married to each other, and those two owners will be filing a joint 1040 tax return, they have the option of splitting all business income and expenses down the middle and each partner reporting their share of the business income/expenses on a separate SCH C for each tax filer on the joint return. That means your joint 1040 return will have two SCH C’s included with it – one for each owner. But this can present its own problems in the event of divorce, separation. The issues can become even more compounded upon the death of one of the owners. If that deceased owner’s will does not pass all assets to the surviving partner, then that surviving partner can find themselves in a tax hell, not to mention the problems that can arise with the “new” owner or owners.
LLC “Like an S-Corp” – For tax purposes only (and I reiterate: FOR TAX PURPOSES ONLY!!!!!) one can elect to have the IRS treat their single member LLC or multi-member LLC “like an S-Corp” ****FOR TAX PURPOSES ONLY!!!!!**** This means your business is treated like and considered to be a physically separate taxable entity. This is accomplished by filing IRS Form 8332 – Entity Classification Election. This allows you to act as if your single member LLC or multi-member LLC is an S-Corp. But understand that if you want the IRS to treat your LLC like an S-Corp, then the business “must” act like an S-Corp, and follow all the laws, rules and regulations required of an S-Corp by whichever state your LLC is registered in. All business income and expenses is reported on IRS Form 1120-S – Income Tax Return For An S-Corporation. The S-Corp will then issue each owner, investor and/or shareholder a K-1 which they will need before they can even start their personal tax return. Unlike a single member LLC which is considered a disregarded entity for tax purposes, an LLC that has filed form 8332 – Entity Classification Election “is” considered and treated like a separately taxable entity.
S-Corp – This type of business is registered at the state level and must conform to the laws, rules, regulations and ordinances of that state which apply to an S-Corp. All business income and expenses is reported on IRS Form 1120-S – Income Tax Return For An S-Corp. The S-Corp will then issue each owner, investor and/or shareholder a K-1 which they will need before they can even start their personal tax return. Unlike an LLC which is considered a disregarded entity for tax purposes, an S-Corp “is” a separately taxable entity, and therefore files its own physically separate tax return and issues K-1’s to all owners, officers, investors and shareholders.
C-Corp - This type of business is registered at the state level and must conform to the laws, rules, regulations and ordinances of that state which apply to a C-Corp. All business income and expenses is reported on IRS Form 1120 – Income Tax Return For A C-Corp. The C-Corp will then issue each owner, investor and/or shareholder a K-1 which they will need before they can even start their personal tax return. A C-Corp “is” a separately taxable entity, and therefore files its own physically separate tax return and issues K-1’s to all owners, officers, investors and shareholders.
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If the last person to move out of the property prior to the sale was a paying rental tenant, you will report the sale in the Rental & Royalty Income (SCH E) section of the program.
If you stopped your depreciation before making the improvements, then enter the information in the Sale of Asset section.
This is not correct. All property improvements will be entered in the Assets/Depreciation section of the program under the Rental & Royalty Income (SCH E) heading. If the property improvement was done after the last renter moved out, then the business use percentage will be ZERO percent. It's in service date will be the date the work was completed and *AVAILABLE* for use. Just because it's available, doesn't mean you actually used it. Hence, the business use percentage is zero percent. This way the asset is not depreciated since it was never actually used, yet it still adds to the cost basis of the property.
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Finally, partnerships do not even file a Schedule E.
Ummmmm. you wanna check that? Last time I reported a rental owned by a multi-member LLC, it was reported on SCH E as a part of that 1065 return. The K-1's that were issued were also reported on page 2 of the SCH E on each partner's personal return. If it's not reported on SCH E, then it's not residential rental property. (But could be something short term like a B&B or an AirB&B rental reported on SCH C)
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If you have entered a military W-2 in your return that was issued to you by DFAS (and if your active duty, I know you have) just work it through the program per the below guidance and you'll be fine with a partial exclusion ***IF*** you pay attention to detail and the small print.
Reporting the Sale of Rental Property
If you qualify for the "lived in 2 of last 5 years" capital gains exclusion, then when prompted you WILL indicate that this sale DOES INCLUDE the sale of your main home. For AD MIL personnel who don't qualify because of PCS orders, select this option anyway, because you "MIGHT" qualify for at last a partial exclusion.
Start working through Rental & Royalty Income (SCH E) "AS IF" you did not sell the property. One of the screens near the start will ahve a selection on it for "I sold or otherwise disposed of this property in 2017". Select it. After you select the "I sold or otherwise disposed of this property in 2017" you continue working it through "as if" you still own it. When you come to the summary screen you will enter all of your rental income and expenses, even it it's zero. Then you MUST work through the "Sale of Assets/Depreciation" section. You must work through each individual asset one at a time to report its disposition (in your case, all your rental assets were sold).
Understand that if more than the property itself is listed in your assets list, then you need to allocate your sales price across all of your assets. You will only allocate the structure sales price; you will NOT allocate the land sales price, since the land is not a depreciable asset. Then if you sold this rental at a gain, you must show a gain on all assets, even if that gain is $1. Likewise if you sold at a loss then you must show a loss on all assets, even if that loss is $1
Basically when working through an asset you select the option for "I stopped using this asset in 2017" and go from there. Note that you MUST do this for EACH AND EVERY asset listed.
When you finish working through everything listed in the assets section, if you ever at any time you owned this rental you claimed vehicle expenses, then you must also work through the vehicle section and show the disposition of the vehicle. Most likely, your vehicle disposition will be "removed for personal use", as I seriously doubt you sold your vehicle as a part of this rental sale.
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