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Partnerships and S corporations use Form 8825 to report income and deductible expenses from rental real estate activities, including net income (loss) from rental real estate activities that flow through from partnerships, estates, or trusts.
The 8825 Form is the form that goes inside of the tax return for the 1065 that allows someone to report the gross income from the rents and all the associated expenses. Understanding where to properly report income and expenses is really important.
If you earn rental income on a home or building you own, receive royalties or have income reported on a Schedule K-1 from a partnership or S corporation, then you must prepare a Schedule E with your tax return.
If you own a part interest in a rental real estate property, report only your part of the income and expenses on Schedule E. Complete lines 1a, 1b, and 2 for each rental real estate property. For royalty property, enter code 6 on line 1b and leave lines 1a and 2 blank for that property.
Rental real estate proceeds are considered to be passive income, like stock profits. The tax code considers rental losses to be passive losses. In general, fewer taxpayers qualify for such deductions. By definition, they are not earned income.
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Although you and your spouse will not each file your own Schedule E as part of the QJV, each of you must report your interest as separate properties on line 1 of Schedule E. On lines 3 through 22 for each separate property interest, you must enter your share of the applicable income, deduction, or loss.
Ways the IRS can find out about rental income include routing tax audits, real estate paperwork and public records, and information from a whistleblower.
Thus, you would have to report all of the rent you receive in income, but none of your expenses for the home would be deductible. (Actually, you would still be able to deduct the mortgage interest, assuming it otherwise qualifies as deductible, and property taxes. These items are deductible even for non-rental homes.)