The Tax Professionals Blog — Rentals

The Sec. 199A deduction has stirred up a lot of controversy in the tax preparation community related to whether landlords are subject to information reporting requirements, typically filing and issuing 1099-MISC forms for annual payments of $600 or more to unincorporated service providers such as plumbers, the pool guy, gardeners, etc. And unfortunately, the government has added substantially to that confusion.

Generally, the self-rental rules apply to taxpayers who rent property to a trade or business in which they materially participate.  In such cases the income is treated as non-passive and losses as passive.  This applies property-by-property even if the properties have been grouped as a single economic activity.  However, where the property is the taxpayer’s personal residence and the rental period is less than 15 days during the year, the rental would fall under the vacation home rental rules, and the income would not be included in income and no rental expenses would be allowed.

Two questions to be answered on Schedule E, Part I (rental real estate and royalties section) are (A) “Did you make any payments in [tax year] that would require you to file Form(s) 1099?” and (B) “If Yes, did you or will you file all required Forms 1099?”