Property Management Blog

Real Estate 101: Understanding the Basics of Tax Statements and 1099s

Real Estate 101: Understanding the Basics of Tax Statements and 1099s

The American Rescue Plan Act has far-reaching benefits for low-wage and unemployed people. It also makes sweeping changes to the tax requirements for small businesses and landlords.

This new legislation reduces the threshold for small business tax reporting from $20,000 to $600. This means some property investors may need to pay taxes on their rental income for the first time.

For now, landlords can continue filing taxes as usual, but all that's about to change for the next tax season. Read on to learn more about tax statements and 1099s and how to manage them going forward.

What Are Tax Statements and 1099s?

Forms 1099-K and 1099-MISC are tax documents used to compile a landlord tax statement detailing income and expenses for the year. Real estate investors who rent their homes must fill out one of these forms, depending on how they receive tenant rent payments.

The 1099-MISC tax form applies to rental income received via check or cash payments. Form 1099-K applies to payments received from electronic sources like debit cards, bank transfers, or credit cards.

You must send a 1099-NEC form to any contractors or vendors you've paid over $600 in the last tax year. The IRS website has much useful information about these documents and how you should fill them out.

If you work with a property manager, they will do the work for you and provide the documents in good time to file your taxes. Ideally, you should receive the applicable paperwork by February 1 each year.

The deadline for submitting your tax returns is February 28th. If you're submitting your information online, you have until March 1 to do so.

As a landlord in Ohio, you must also submit this information to the Ohio Department of Taxation.

Completing 1099s and Tax Statements

When completing your tax documents, you'll use the 1099 forms to calculate your income and deductions. Each 1099 should contain the following information:

  • Taxpayer ID Number
  • Recipient's address
  • Total amounts paid

You may deduct any relevant expenses from your earnings to calculate how much tax you owe the IRS. You fill out a Schedule E return detailing rental income, expenses, and profit from your rental properties.

Deductible expenses include the following:

Always reach out to a tax professional if you're uncertain about how to proceed with your taxes.

Making Tax Time Easier for Landlords

Completing your tax statements and 1099s is just one of the many responsibilities of being a landlord. Other tiresome tasks include tenant screening, property inspections, and ongoing property maintenance.

Working with a property manager is the best way to streamline these tasks and alleviate stress.

Haven Realty is your first choice when you need help managing your Cleveland investment property. We offer a full range of property services, including the timely submission of monthly owner statements to help you meet your tax obligations.

Our services help preserve your investment property, keep tenants happy, and limit vacancies. Speak to an expert about your property management needs today.