As a Charlotte, NC, landlord, you are bringing in the big bucks!
However, when tax season rolls around, you realize you owe back some of the hard-earned money you made. While paying taxes is unavoidable, there are ways to reduce your tax liability.
By understanding tax statements and 1099s, you can accurately report your income and expenses throughout the year to ensure your records are correct. You can also utilize tax deductions to mitigate your costs.
Keep reading to learn more.
Understanding1099 Forms
Tax statements and 1099s are documents you should be familiar with as a landlord. 1099s document income from a source that isn't an employer. For example, an independent contractor will fill out a 1099 form.
To grasp your rental property taxes, you need to understand these forms. While there are multiple variations of 1099s, there are only three that landlords should be aware of:
1099-K
Accepting credit card or debit card transactions that account for more than $600 must be reported through the 1099-K form. You can report these payments during the tax year they are received.
If you use property management software or a rent collection app, you should automatically receive these forms before tax season.
1099-NEC
Paying non-employees for their services requires using the 1099-NEC form. Working with an independent contractor for maintenance and repairs is a common reason to use this tax form.
1099-MISC
For miscellaneous sources of rental income, you will use the 1099-MISC form. Property owners who collect paper checks or cash as rent payments will still need to declare their income through the 1099-MISC form.
How to Report Rental Income
Using the above forms, you can complete your rental property taxes by reporting your income. Landlords and real estate investors should report income at the end of the tax year for accurate records.
It's ideal to hire a property management company that can employ quality income and expense-tracking software.
Digitizing the tax process is less time-consuming than traditional methods of tax reporting. Not to mention, you are prone to fewer errors when you use an adequate software program.
Rental Property Tax Deductions
A Charlotte landlord can reduce their tax trail by considering rental property tax deductions. A property manager can help you determine the deductions that make the most sense for your business. These are the deductions that exist for the industry:
- Depreciation expenses
- Utilities
- Mortgage interest
- Landlord insurance costs
- Landscaping fees
- Legal and professional fees
- Repairs and maintenance
The fees you pay to hire a property management company are also tax deductible, so it's something to consider.
Tax Statements and 1099s: The Bottom Line
Tax statements and 1099s can get confusing, especially as laws and regulations change. If you want to stay tax-compliant and get your qualifying deductions, a property management company can help.
At Wilkinson Property Management, Inc., we've been helping Charlotte landlords like you since 1999. With decades of experience, we know what it takes to make an investment successful.
From rent collection to property invoices, we can handle accounting tasks for you to prepare you for tax season. Contact us today to learn more about our services.
