Last year I needed to move in with my mother to take care of her. I rented out my condo. I do not have a business set up. My question is how do I prepare to pay taxes on the income I have earned? Do I need to set up a business? I was thinking no. I hate to itemize stuff, but if it's necessary I could. With the new double standard deduction, I might still come out ahead by not itemizing. I really have no clue. Could anyone post some ideas as to how they'd do it? Do I just need to see a CPA, or can I do it myself simply?
No, you don't need to set up a business.
Rental properties are unrelated to itemizing or the standard deduction. All the income and expenses for rental properties go on schedule E, and then the net income goes on 1040.
I highly recommend using an accountant, especially in a complex situation like this where you've converted a residence into a rental.
@Gerald Jarreau Jarreau
The rental will be reported on schedule E of your 1040. You do not need to set up a business.
You will need to figure out the depreciable basis at the time it was transferred from a primary to a rental. I would consult with a tax pro to get this handled- it can be a little tricky.
@Jon Holdman in this situation it may impact his itemized/standard situation because previous it was possible that mortgage interest from that home is what bumped him into the ability to itemize.
If it's been moved to being a rental that's now on Schedule E not A- and with the new double standard deduction, he's more likely to not itemize this year for sure.
@Natalie Kolodij true enough this may affect his itemized deductions. My point was that it is breaking out all the details of the rental income and expense is required, whether you itemize or not.
Also the double standard deduction doesnt go into effect for filing 2017 taxes.
Just buy the next higher version of Turbo Tax or Tax Cut above the basic version -- check on line or the back of the box to make sure this version includes rental property. The program will walk you through it. Save your receipts from the date it was put into service as a rental.
I always did my own taxes when I just had one unit. Start early, as the program will prompt you for necessary information that you might need time to gather. It was easy.
You do not need to create an entity to report rental income. However, you should look into the tax laws of Baton Rouge. Some cities require owners of rental properties to "register" the property with the city or have some type of business license. This is just the city trying to get extra revenue for the city.
In regards to converting the condo from a personal residence to a rental property.
Items such as real estate taxes and mortgage interest will be Schedule A(itemized deductions) for the part of the year that it was a personal residence.
It will be deductions against your rental income from the time it was a rental property.
You are also entitled to take other deductions which were required to maintain the property.
The new "double" standard deduction relates to 2018.
I hope your mom is in good health!
Thank you all, for the information!