Video instructions and help with filling out and completing How Form 4797 Expenditures

Instructions and Help about How Form 4797 Expenditures

Heather you're watching aardvark tax TV I'm Sean kenefick I'm an enrolled agent and customer service representative here at aardvark tax this video is part of a continuing education course available on our website at today we're going to be talking about rental income and expenses and what forms you might use to do that in fact you can put it on three forms the most obvious choice is Schedule E that's where you put any passive income such as rental property but if you are in the business of renting property such as being a real estate agent or perhaps a property management company then you're gonna use different forms maybe Schedule C if you are a sole proprietor or maybe the 1120 if you're a corporation thirdly if you've chosen not to rent your property for profit meaning that you're not renting it at fair market value then you cannot use the Schedule E either in fact then you would put your gross income from the rental on your 1040 and you'd put your deductions on schedule a we're gonna be talking about Schedule C and not-for-profit rentals in other videos so today we're just going to concentrate on Schedule E each Schedule E form allows you to put up to three properties income and expenses on it and they're listed as a B and C if you have more than three properties that you use for rental purposes then you're going to use more than one Schedule E once you've listed the property you'll also talk about in the amount of time it was used for rental versus personal use we're gonna be talking about rental versus personal use in a different video so for now we're just gonna concentrate on full-time rentals next we're gonna talk about gross rental income now that includes the month to month rent that you receive from your tenants but it also includes some other things that you might not be thinking about for instance advanced rent is declara Balazs income in the year that it was received and not necessarily in the year to which it was applicable so for instance if you get six months of rent from your tenant in November and you might think that you should apply that as two months to this year for November December and then four months for next year for the rest of the rent well that would not be correct instead you will include all of that rent all six months of it in the year that it was received additionally if your tenants pay for any expenses and pay that in lieu of rent so for instance they have a repair on a sink and a plumber comes and fixes up the sink and they pay that and then they don't give you rent for that money you still have to declare that as income even though you will declare the repair itself as an expense that will be subtracted from income as well but you still need to put it in those two places and not just a considerate non rent the third thing you need to consider when you're talking about rental income is that security deposits are typically not considered income or expenses unless part of them are forfeited by the tenant due to a failure to pay rent or in needs of repairs that are made after the tenant leaves if any of the security deposit is forfeited by the tenant you will include that income in your gross income for the year in which it was forfeited and not necessarily in the year that you received the security deposit if you pay out the security deposit in completely to the tenant there is no need to included an income or declare it as an expense before we move on to expenses we have to understand the difference between an expense and an improvement an expense is a routine cost associated with keeping your property in shape while an improvement materially increases the value of the property so an improvement is something like a remodel or adding on a new room putting a pool in the back yard or replacing your roof now some of these things might be either/or for instance you can repair your roof and that's an expense but if you replace your roof then that is an improvement improvements are treated differently than expenses expenses are listed on the Schedule E and you can go ahead and take the full expense in the year that it was incurred improvements you must take overtime and their depreciated and that depreciation value is exchanged over to your Schedule E so as we're gonna continue on with expenses keep in mind that these are all small routine costs we're gonna talk about rental depreciation in another video now that we understand the difference between an expense and an improvement let's talk about the expenses as they're listed on Schedule E I'm gonna talk about them in order now the first one is advertising if you need to advertise in a newspaper - in order to attract tenants or perhaps you put out fliers in order to get tenants to come to your building these are deductible expenses on the advertising line the next line auto and travel if you use your car to travel to your rental property in order to collect rents to effect repairs or just to check on it periodically that travel is deductible you can either take it as an actual expense meaning the gas you paid to get from here to there or you can go ahead and take the standard business mileage rate which typically tends to be a better deduction because it also includes things like the cars depreciation and wear and tear and maintenance included in that cost the next line is cleaning and maintenance if you hire cleaners to clean your apartments in