What documents do landlords need to prepare for taxes?
Having the right documents and records on hand when it comes time to file your year-end tax return can streamline the process for everyone involved. As a rental property owner, you can prepare for tax time by gathering the following documents:
- Prior years’ tax records.
- Tenant leases.
- Property titles or deeds.
- Legal documents, such as incorporation records and inspection reports.
- Business insurance policies.
- Receipts for rent payments.
- Records of security deposits.
- Documentation of expenses, including marketing, mortgage interest, repairs, maintenance, landlord-provided utilities, service fees, office expenses, etc.
- Payroll expenses if you have employees or independent contractors.
- Business travel expenses.
What are the important tax deadlines remaining for 2024 and 2025?
Most tax deadlines for 2024 have already passed. The final deadline for paying 2024 estimated quarterly taxes for the fourth quarter is Jan. 15, 2025.
The deadline for filing 2024 year-end personal tax returns is April 15, 2025. Quarterly estimated tax payments for small business owners, including rental property owners, in 2025 will be due on the following dates:
- April 15, 2025.
- June 16, 2025.
- Sept. 15, 2025.
- Jan. 15, 2026 (for the fourth quarter of 2025).
Depending on your business structure and whether you have employees or independent contractors helping with property management or other tasks, there may be additional tax deadline considerations.
Can landlords deduct losses related to missed rent payments by tenants?
The answer depends on whether you report taxes on a cash basis or an accrual basis. Under the accrual method, you report income and expenses when they are due and may deduct uncollected rent.
On a cash basis, you report income upon receipt and expenses upon payment. As a result, the IRS says you cannot deduct uncollected rent if you are a cash-basis taxpayer. You may, however, have other deductible expenses related to missed rent payments, such as legal expenses incurred in trying to collect unpaid rent.
Does forming a business entity make taxes easier for landlords?
A separate, legal business entity for your rental property business can help keep your business and personal income separate. In addition to personal liability protection, there are several potential tax advantages to forming a business entity.
Forming an LLC or corporation can provide you with additional opportunities to minimize your personal income taxes. Tax advantages vary depending on the type of business entity you select. If you have more questions about whether forming an LLC or corporation for your rental property business makes sense, reach out to a Rocket Legal Pro for affordable legal advice.
If you change your business type in the middle of a tax year while operating your rental property business and earning income, you may need to file two separate tax returns for your business in that year.
Whether you’ve been leasing property for decades or a few months, taxes can be confusing. The right tax help can assist you in staying compliant with changing IRS regulations.
This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.
