Tax Statements: What You Need To Know About Rental Real Estate Taxes

Tax Statements: What You Need To Know About Rental Real Estate Taxes

Real estate investment is still the number one long-term investment for people living in the United States. More and more investors are taking advantage of the tax benefits and breaks that come with owning an investment property.

Whether you're just getting started or haven't started yet, you should look into the tax statements that come with rental real estate income. Some people believe that owning rental property makes taxes needlessly complicated. However, there are plenty of benefits that come with it.

To learn more about rental income in Phoenix and how it's taxed, keep reading.

What Counts as Rental Real Estate Income

First, you must identify what rental real estate income looks like. Owning a second home does not entitle you to rental property tax breaks.

Rental real estate income takes into account all of the money that you receive as rent. You must have made this money in exchange for individuals staying at your rental home, or second home as some people call it.

These amounts include any security deposits, advanced rent, cancelation fees, damage collections, and more. To be safe, you should count any and all money you've collected from renters.

How to Make Deductions From Rental Income

Separately, you should keep track of any expenses you've had for your Phoenix rental property. These expenses may include the following:

  • Repair and maintenance costs
  • Utility costs
  • Mortgage interest 
  • Property insurance
  • Travel costs
  • Property taxes
  • Professional and legal fees

All of these expenses that you're paying for the rental property count as deductions from your taxes.

Additionally, depreciation of the home can also count towards your tax deductions.

You may also have expenses outside of the home to count. For example, you may work outside of a home office. Expenses for that home office count towards rental deductions.

If you're unsure whether something counts as a deduction, write it down. You can always check with your accountant later and ask whether that payment counts or not.

Report Rental Property Income From an Investment Property

Your Phoenix rental income incurs tax just like any other income that you make. The Internal Revenue Service (IRS) taxes this income according to tax brackets for different filers.

You report your total rental income and deductions when you submit your taxes at the end of the tax year. 

A 1099 form records the rental real estate income that you made throughout the year. You'll submit this form along with the rest of your taxes to let the IRS know what income you're claiming.

Tax Statements and More for Rental Properties

Understanding the tax statements and rules behind Phoenix rental income is difficult. Unless you have an accounting degree or a background in business, it may sound like complete gibberish.

That's why a lot of investment property owners turn to property management companies like ours. Our team at Home River Group can help you take care of your rental property so you have more time for things like taxes.

Check out our property management services in Phoenix. We can't wait to work with you!

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