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Taxes with a rental now - should I hire out?

February 28th, 2013 at 07:35 pm

I have always done our taxes, first manually filling in all the forms by hand, then moved on to TaxAct and have been using TaxAct for several years now.

Last year, we became landlords and now I find myself in uncharted territory. I think it should be simple enough to put our rental info into TaxAct but I have a little voice inside me that just won't shut up... I guess I'm afraid I'll miss something and really put us in target for an audit or something.

Any of you do your own taxes while having rental properties?

10 Responses to “Taxes with a rental now - should I hire out?”

  1. ceejay74 Says:

    I'd hire out the first year at least! I'd have missed depreciation as an allowable expense if I'd done it myself. I did 'em this year and just copied the depreciation number the accountant used the past two years, since it was the same -- no idea how he arrived at it though!

  2. Bob B. Says:

    We do. We use Turbo Tax. Fairly simple.

    Rent = income.

    For expenses, deduct taxes, mortgage interest, insurance, repairs, any utilities that you may pay. If you travel from home to rental to check on things, or provide maintenance, you can deduct travel expenses at IRS rates. Keep appropriate receipts to back up your expense claims.

    TaxAct should generate a depreciation schedule for you. Enter your original cost for the rental.

    All this ends up on 1040 Schedule E.

    If you are uncomfortable with this in any way, sure, hire an expert. We are not tax experts in any way, but we have been filling in Schedule E through Turbo Tax for 4 years now. Haven't had any problems yet.

  3. Beawealthywarrior Says:

    I agree with Bob B....that's exactly what I do

  4. North Georgia Gal Says:

    I too use Turbo Tax. It fills out the depreciation amount automatically once you put all the other numbers in. It makes it very simple

  5. MonkeyMama Says:

    It just depends. It doesn't hurt to hire someone out, and make sure it is handled correctly first year (make sure you are depreciating correctly, have all deductions covered, not deducting things you shouldn't, etc.).

    You don't depreciate the cost - you depreciate the fair market value at time you converted to a rental. See "Basis of property changed to rental use" on IRS publication:

    http://www.irs.gov/publications/p527/ch04.html
    I believe this was a home you converted to a rental?? So, just FYI if my assumption/memory is wrong.

    Also, the land portion is *not* depreciable. Which may not be a big deal where you are, but is a big deal in the state I live in (land is a chunk of the cost of any home, here).

    Finally, one thing that is often missed with DIY taxes is items that carryforward. If you have passive losses that carryforward, due to rental, you will want to keep an eye on those. You don't want to lose those losses. I have had a few experiences with Turbo Tax/like software not handling carryforwards well (with losses that you are entitled to take "eventually," just disappearing from the tax program). Passive losses and investment losses are the biggies, but there are all sorts of deduction and loss carryforwards.

  6. Bob B. Says:

    I stand corrected on depreciating cost vs. FMV at time it was converted to a rental. Thanks for the clarification MM.

  7. Looking Forward Says:

    I use freetaxusa.com which has been great for everything and costs less than TT.

  8. Jerry Says:

    We have a rental property, plus we live overseas, so it just leads to a lot less stress for us to let a professional back in the States handle it. Plus, he is good, and we have some insurance that things are being managed properly, we trust this guy.
    Jerry

  9. all4money Says:

    Thanks guys for all the feedback. I took a whirl with the tax program and it seems pretty "easy" but I do realize that like all computer programs, the output is only as valid as its input Smile I'll review it a few times and then decide if I should hire someone this time or not. Ugh. Thanks!

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