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Houston Property Management Tips

A Quick Guide to Understanding Rental Property Tax Statements and 1099s

A Quick Guide to Understanding Rental Property Tax Statements and 1099s

It's almost time to file your taxes this year. If you are a new property owner, this time of year can be scary.

As a Houston, Texas, property owner, filing taxes and qualifying for deductions are tasks you need to get used to. Understanding tax statements and 1099s can help you turn a complex process into a simple one.

Keep reading to discover what you need to know.

1099-MISC Form

When researching tax statements and 1099s, you might have noticed that there are different types of 1099 forms. The IRS uses the 1099-MISC to report income that isn't reported on standard W2 forms.

Non-employee compensation is filed under the 1099-NEC form, but you need to file a 1099-MISC form for:

  • Rental income
  • Medical and health care payments
  • Payments to a lawyer
  • Section 409A deferrals

1099-MISC forms are the primary method to report rent and attorney fees totaling $600 or more.

1099-NEC Form

The IRS requires businesses to report non-employee compensation in a different form. Property managers must file this form if they pay an independent contractor $600 or more in a year.

This non-employee might be a landscaper, HVAC professional, plumber, locksmith, or cleaner.

If you are unsure what falls under IRS form 1099-NEC, consult a tax professional. A property management company in Houston, Texas, will also know the ins and outs of tax documentation for landlords.

1099 Exemptions

There are some scenarios when property managers are exempt from filing a 1099. As mentioned above, you don't need a 1099 for payments less than $600.

With accurate rental property accounting, figuring out how much you've paid employees should be simple.

Rental property owners who are established as corporations don't need to file a 1099-MISC form. You'll have to file this form if you are a limited liability company (LLC) property owner.

You don't need to file a 1099-NEC form for any maintenance work of other services by incorporated businesses either.

Rental Property Tax Deductions

Reporting income and expenses can get expensive if you don't know what deductions you qualify for. As a rental property owner, you can deduct various expenses related to maintaining the property.

Some of the most common deductions are:

  • Mortgage interest deduction
  • Rental property depreciation
  • Repairs and improvements
  • Property taxes
  • Travel expenses

If you hire a property management company in Houston, Texas, these expenses might be tax deductible as well.

There are also general expenses that aren't tax deductible, including:

  • Personal expenses
  • Vacancy expenses
  • Cost of travel from your home to the property
  • Fines and penalties

It's important to note that repairs and upgrades can be deductible and non-deductible depending on their useful life. Certain costs might not be fully deductible in a single period.

Tax Statements and 1099s: Preparing for Tax Season

When it's time to do your rental property taxes, it's important to understand tax statements and 1099s.

You are likely to file both types of 1099 forms to report income. With that out of the way, you can focus on your tax deductions.

If all of this seems too complex, don't worry! Our rental property management company can help. Terra Residential Services, Inc. CRMC® has been providing services to the Greater Houston area since 1990.

With decades of experience in the property management industry, we can manage your property while you manage your life. Contact us today to get started.