Student with One Property: Need to File Taxes?

Question

Greetings folks,

I'd appreciate any feedback regarding this question: I am currently a student and not working; my only income is some cashflow from the one rental property I own. I just filed my 2017 taxes, but it had not even occurred to me that I may have not needed to file given my low income. The year's total rents was about $23,000 with approximately 75% of that going to the mortgage/utilities/management fees. The remaining cashflow was my only income for 2017. So, I am wondering if, given my low income I had to bother filing taxes for 2017 at all and could have avoided the bill I'm about to get from my accountant. Or does one need to file every year regardless of income if that person owns a rental property?

Much thanks.

Basit Siddiqi · Answer

@Jesse SteinYou were required to file your tax return based on the gross receipts you indicated. You likely should not have had to pay any federal or state income tax based on the numbers you are providing.(Washington doesn't have a state income tax).Given that your return was simple(only ownership in one rental property) - hopefully the damage from the accountant wasn't too bad.There are also education credits(refundable and non-refundable) that you may have been entitled to.

Steven Hamilton II · Answer

Your gross income is over the threshold, so yes, you will have to file. You are required to claim the income and depreciation. In the event of audit you have to prove that you are entitled to the deduction. So yes, you are over the required income to file.

John Acheson · Answer

Jesse, great Q and what I know for sure when you change CPAs or tax preparers or move, stop and start filing etc. you need to keep track of the depreciation schedules because when you go to sell the property, you're going to have to run the numbers from EVERY year that you wrote off depreciation to recapture it to calculate your gain upon sale.

The other issue is are you hoping to get real estate financing in the next few years?

Since lenders now ask for 2 years of prior tax returns, not filing could jeopardize your future real estate investment career, especially if your increase income this year.

I also know that for the Schedule C the minimum to file is something like $400 net but I'm sorry that I can't find the answer for Schedule E.

Student with One Property: Need to File Taxes?

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