Landlords often enjoy a relatively passive income stream from their properties. However, like any other form of income, rental income is subject to taxation. This raises an important question: how is rental income taxed?
Failure to file your taxes properly can lead to legal issues which is why understanding how tax on rental income works is crucial for property owners. That's why we created this guide.
This article will cover everything you need to know about taxes on rental property so you can make informed decisions that maximize your financial benefits.
Based on the Internal Revenue Service (IRS) tax bracket, rental incomes are subject to taxation as ordinary income. This means that the tax on rental income is calculated in the same way as your other sources of income.
To give you a clearer picture, here are the tax brackets for 2024 and 2025 for single filers, married couples filing jointly, and heads of households.
2024 Tax Brackets
2024 Tax Rate
Single Filers
Married Filing Jointly
Heads of Households
10%
$0 to $11,600
$0 to $23,200
$0 to $16,550
12%
$11,600 to $47,150
$23,200 to $94,300
$16,550 to $63,100
22%
$47,150 to $100,525
$94,300 to $201,050
$63,100 to $100,500
24%
$100,525 to $191,950
$201,050 to $383,900
$100,500 to $191,950
32%
$191,950 to $243,725
$383,900 to $487,450
$191,950 to $243,700
35%
$243,725 to $609,350
$487,450 to $731,200
$243,700 to $609,350
37%
More than $609,350
More than $731,200
More than $609,350
2025 Tax Brackets
2025 Tax Rate
Single Filers
Married Filing Jointly
Heads of Households
10%
$0 to $11,925
$0 to $23,850
$0 to $17,000
12%
$11,925 to $48,475
$23,850 to $96,950
$17,000 to $64,850
22%
$48,475 to $103,350
$96,950 to $206,700
$64,850 to $103,350
24%
$103,350 to $197,300
$206,700 to $394,600
$103,350 to $197,300
32%
$197,300 to $250,525
$394,600 to $501,050
$197,300 to $250,500
35%
$250,525 to $626,350
$501,050 to $751,600
$250,500 to $626,350
37%
More than $626,350
More than $751,600
More than $626,350
In addition to the tax rates mentioned above, you may also be liable for taxes on rental property imposed by your state government. When calculating your rental income and navigating the complexities of rental income tax, it’s wise to consult with a financial advisor or tax expert.
Key Tax Dates for Landlords
As a landlord, staying on top of tax deadlines is crucial for managing your rental income effectively. Most tax deadlines for 2024 have already passed, but there are still important dates to keep in mind. The final deadline for paying estimated quarterly taxes for the fourth quarter of 2024 is January 15, 2025.
For those filing year-end personal tax returns, the deadline is April 15, 2025. If you’re a small business owner or a rental property owner, it’s essential to be aware of the upcoming quarterly estimated tax payment deadlines for 2025.
These payments are due on the following dates:
April 15, 2025
June 16, 2025
September 15, 2025
January 15, 2026 (for the fourth quarter of 2025)
Depending on your business structure and whether you employ independent contractors or have employees assisting with property management, there may be additional tax considerations to keep in mind regarding taxes on rental property.
Important Annual Tax Dates for Landlords
Deadline
Due Date
Tax Season Begins
January 23rd
Due Date for W-2 Forms
January 31st
1099 Forms Sent
January 31st
Tax Day & Form 4868 (Extension Request) Deadline
April 15th
Tax Extension Deadline
October 15th
Partnerships, Multi-member LLCs, and S-Corporations (Form 1065)
March 15th
Extension Deadline For Form 1065
September 16th
Essential Documents for Tax Reporting
Effective record-keeping and document storage are crucial for landlords, particularly when it comes to tax reporting. Maintaining accurate records not only ensures compliance with tax laws but also helps maximize deductions and minimize liabilities.
By organizing essential documents throughout the year, landlords can streamline the tax filing process and avoid potential issues with the IRS.
Documents Landlords Should Collect and Store For Tax Time
Lease Agreements: Lease agreements outline the terms of the rental arrangement and are essential for verifying rental income and tenant obligations. These documents help clarify how rental income is taxed and provide a clear record of agreements made with tenants.
Receipts for Expenses: Keep receipts for all property-related expenses, including repairs, maintenance, utilities, and supplies. These expenses can be deducted from your rental income, reducing your overall tax on rental income.
Mortgage Interest Statements (Form 1098): This form, provided by lenders, details the mortgage interest paid during the year. Since mortgage interest is deductible on your tax return, retaining this document is vital for minimizing taxes on rental property.
Property Tax Statements: Documenting property taxes paid is essential for claiming deductions. These statements can significantly impact your rental income tax calculations.
Insurance Premiums: Keep records of insurance payments, as these are also deductible expenses that can reduce your taxable income from rental properties.
Depreciation Schedules: Maintain documentation related to the depreciation of your property. Properly accounting for depreciation can significantly lower your taxable income, making it an important aspect of how rental income is taxed.
Utility Bills: If you pay utilities on behalf of tenants, collect these bills as they can be deducted as operating expenses, further reducing your overall tax burden.
Tenant Communication Records: Keep a log of communications with tenants regarding repairs, complaints, or any agreements made. This documentation can be invaluable for resolving disputes and clarifying responsibilities related to rental income.
Capital Improvement Receipts: If you make significant improvements to the property, retain receipts for these expenditures. Such improvements may be added to your property's basis for depreciation purposes, ultimately affecting how is rental income taxed.
Storing Documents and Generating Reports With Landlord Studio
With so many records to maintain—ranging from lease agreements and expense receipts to tax documents—it's easy for things to get misplaced. Disorganized record-keeping increases the risk of errors during tax filing, missed deductions, and even disputes with tenants or the IRS.
When financial records and documents are scattered, tax season becomes stressful and time-consuming. Landlords might miss out on deductions for expenses like mortgage interest, repairs, or capital improvements simply because the receipts weren’t stored properly. Additionally, unclear records can lead to overpayment of taxes or costly penalties for non-compliance. Poor documentation also makes it harder to address tenant disputes or verify income and expenses in case of an audit.
Landlord Studio offers a comprehensive solution to simplify record-keeping and document storage for landlords.
How Landlord Studio Helps You Manage Important Rental Property Documents
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By centralizing your financial and property management data, Landlord Studio helps you:
Stay organized: Securely store lease agreements, receipts, and tax documents in one place.
Maximize deductions: Easily track expenses, including repairs, maintenance, insurance, and utilities.
Prepare for tax time: Generate clear and accurate reports, including income statements and depreciation schedules.
Avoid disputes: Maintain detailed tenant communication logs and capital improvement records.
With Landlord Studio, you can streamline your tax filing process, reduce stress, and focus on managing and growing your rental property portfolio.
Schedule E (Form 1040) (Supplemental Income and Loss): Landlords use this form to report rental income and related expenses such as mortgage interest, repairs, depreciation, and property taxes. It calculates net income or loss from rental properties, which is then reported on the taxpayer's Form 1040.
Form 8825 (Rental Real Estate Income and Expenses of a Partnership or S Corporation): Used by partnerships and S corporations to report rental income and expenses, similar to Schedule E but for entities. Each partner or shareholder’s share of income or loss is reported on their personal return via Schedule K-1.
Form 8582 (Passive Activity Loss Limitations): This form calculates how much of a landlord’s rental losses can be deducted, as rental activities are generally considered passive unless the landlord qualifies as a real estate professional. Losses exceeding IRS limits are carried forward to future years.
Form 1099-NEC (Nonemployee Compensation): Landlords use this form to report payments of $600 or more made to independent contractors, like plumbers, electricians, or property managers, for services performed for rental properties. It replaces the nonemployee compensation section previously found on Form 1099-MISC.
Form 1099-MISC (Miscellaneous Income): Landlords issue this form for various payments that don’t fall under Form 1099-NEC, such as rent paid to a landlord by a business tenant or prizes and awards. It’s less common for individual landlords but applies in certain situations.
Form 1099-K (Payment Card and Third-Party Network Transactions): If landlords receive rental payments through platforms like Landlord Studio, PayPal, Venmo, or other third-party processors, this form reports payments exceeding $600 annually. It ensures that income from digital transactions is reported for tax purposes.
IRS Form 4562 (Depreciation and Amortization): Form 4562 is used by landlords to claim depreciation on rental properties and equipment, spreading the cost of these assets over their useful life. It also allows for deductions like bonus depreciation and amortization of intangible assets, helping reduce taxable income and optimize tax savings.
How To File Your Tax Return as a Landlord
Filing your taxes as a landlord can feel complex, but with Landlord Studio, keeping accurate and up-to-date rental accounts is easier than ever - allowing landlords to maximize deductions and file a timely tax return. Landlord Studio helps you organize the data you’ll need for essential forms like the IRS Form 1040 or 1040-SR, and Schedule E, Part I, ensuring you're prepared to report your rental activities correctly.
Reporting Rental Income and Expenses on a Schedule E
On Schedule E, you need to list your total rental income, expenses, and depreciation for each of your individual properties. This means you need to be tracking your income and expenses on a property by property basis - something that can get quite complex if you're using spreadsheets and paper processes or general accounting software like QuickBooks.
Make sure to refer to the Instructions for Form 4562 to calculate the correct amount of depreciation to enter on line 18 of Schedule E. If you have more than three rental properties, you will need to complete and attach additional Schedule E as necessary.
For each property, fill in lines 1 and 2 with the relevant information, including the street address and then list each properties income and expenses by category. However, only complete the “Totals” column on one Schedule E. This column should reflect the combined totals from all your rental properties.
The easiest way to accurately fill out your Schedule E is to leverage software like Landlord Studio. With Landlord Studio you can easily keep accurate up to date records of your finances throughout the year. At tax time, simply generate your Schedule E report (purpose-built for landlords) and copy your details across.
How To Run a Schedule E Report with Landlord Studio
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To get your data out of Landlord Studio, simply run a Schedule E report that breaks down the income and expenses for each of your properties as required by the IRS and with default expense categories in-line with the IRS Schedule E Form 1040.
Here's how:
Step 1: Log in or create your free account. Step 2: Once you're happy income and expenses are up to date, navigate to the reports tab via the left-hand menu. Step 3: Select the report you want to generate, in this case, the Schedule E report, and hit run. Step 4: Use the filters at the top to select the properties you want to run the report on. You can also filter by income and expense categories and date range. Step 5: Export the report as a CSV or PDF file. Easily share this report with your CPA or business partners.
It’s important to note that if your rental expenses exceed your rental income, your loss may be subject to limitations. The amount of loss you can deduct may be restricted by passive activity loss rules and at-risk rules.
To determine if your loss is limited, consult Form 8582, which addresses passive activity loss limitations, and Form 6198, which covers at-risk limitations.
Personal Use Considerations
If you personally use a dwelling unit that you rent out—such as a vacation home or a residence where you rent a room—your ability to deduct rental expenses and losses may also be limited. Understanding how these factors affect your rental income tax is crucial for accurate reporting.
How To: Landlord Studio and Tax Compliance
Landlord Studio offers all the tools you need to enhance your financial management, maximize tax deductions, and ensure compliance with IRS regulations.
With default income and expense categories in line with IRS requirements getting set up and started accurately tracking your finances is easy - simply, add your property and lease details and begin logging payments.
If you want to streamline your rental accounting further, you can connect your bank accounts, scan receipts, track mileage, and run custom reports to get deep financial insights.
Key tax and accounting features you'll love, include:
Document & Receipt Management: Securely store essential documents including lease agreements, receipts, and other important tax-related paperwork in one place.
More About Landlord Studio's Powerful Rental Accounting Features
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You can set up recurring expenses for regular payments such as mortgage and insurance costs. By connecting your bank accounts, you can import up to two years of transactions to review and reconcile income and expenses in real-time.
Bank feeds employ smart logic with custom rules to auto-suggest matches and help you streamline your income and expense reconciliation. You also get your very own AI accounting assistant built-in to help ensure your expenses are reconciled and categorized accurately.
Reduce manual data entry, save time, and minimize the potential for costly accounting errors. Ensure your financial records are kept accurate and up-to-date throughout the year so you never miss an expense again.
