Federal Tax Forms for
Residential Landlords

A necessary ritual for residential landlords is gathering the necessary federal tax forms and filing their income tax returns each year. As a landlord, you can make this process much easier and save yourself time and effort if you have some knowledge about the most common tax forms that are needed by rental property owners.

Form 1040, U.S. Individual Income Tax Return - This is the tax form that is "at the pinnacle" of the IRS forms. It contains the taxpayer's "bottom line" which determines whether or not they owe income tax or will receive a refund from the IRS. Form 1040 contains entries from other tax forms and schedules.

Schedule E , Supplemental Income and Loss - This is one of the "bread-and-butter" tax forms for rental property owners. The form is used to show all the income and expenses for up to three separate rental properties. The resulting income or (loss) from these properties is then placed on line 17 of Form 1040. It will then either increase or decrease the taxpayer's "total income" on line 22.

Schedule A, Itemized Deductions - A taxpayer has the option of choosing either the standard deduction or "itemized" deductions for reducing their taxable income. Normally, the taxpayer will choose the one that results in the greatest income tax deduction. Depending on an individual's filing status, the standard deductions for the 2006 tax year range between $5,150 to $10,300.

Form 4562, Depreciation and Amortization - This form is used to enter the depreciation for both real and personal property used in the rental activity. This includes depreciation of the building (27.5 yr real property ), land improvements (15 yr property), and personal property such as stoves, refrigerators, carpets, etc.(5 yr property). The resulting depreciation expense from this form is then entered on line 20 of Schedule E.

Form 6198, At-Risk Limitations - This form sets a limit on the amount of deductible loss that can be claimed on Schedule E. Specifically, this loss cannot exceed the amount that the taxpayer has actually invested in the rental activity, or the amount that is "at-risk".

Form 8582, Passive Activity Loss Limitations - This form is used by investors who do not have "material participation" in the rental activity (i.e., they have passive activity). Certain rules apply which may limit the amount of loss they can deduct from their income.

So, that wraps up our summary of the most commonly used federal tax forms that are used by typical residential landlords. They can be found at www.irs.gov.

Please note: The above information on federal tax forms is general in nature and should not be considered tax or accounting advice. It should not be relied upon for your own particular circumstances. For tax advice, please consult the services of a qualified accountant or tax attorney.

For more in-depth information and examples on the use federal tax forms for rental property owners, please visit The Landlord's Library book collection. It's a terrific "one-stop" resource for helping you pave the path to your landlording success.

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