[Jessica]

My husband does our taxes every year through Turbo Tax. However, this will be the first year including our rental property in the mix (which is in the name of our Trust).

Would you advise we outsource our taxes to a professional this year to make sure no stone is left unturned, or would you say it’s totally fine for him to forge ahead as Schedule E pretty much lays everything out for you?

I’m not sure under what circumstances someone would have to owe taxes when having an income producing rental?

Or if, generally speaking, usually you will see a refund owed?

We did have some pretty significant repairs done on the rental property due to an unfortunate water leak last year.

We filed a claim through our insurance and paid the deductible; we also ended up paying 100% out of pocket for a full repipe on the house when the leak returned.

Was thinking he run the numbers, but still outsource to see if the bottom line number aligns. In which case moving forward, we’re confident that he’s got this!

Thoughts? If recommending a tax advisor, please feel free to give us a great contact.

We live in the suburbs of Atlanta

[Dan]

I work with real estate investors (an ads a tax preparer but as a financial planner) and I highly encourage you to hire a tax professional well versed in real estate to help you do this correctly.

Get it wrong, and at some point in the future you may need to pay someone to undo years of incorrect accounting.

Just pay to get it done correctly upfront and save the stress and hassle and expense of fixing it later. But do look for someone with being the basic level of real estate expertise.

Check out “the real estate cpa” podcast. Excellent information. Good luck!

[Lauren]

In the scenario you listed, I would consider whether the repair was an expense vs an improvement that needs to be depreciated. The IRS has specific rules to make this determination.

Our rental is cash flow positive, but due to depreciation we usually show a small loss for taxes.

Our loss does not benefit us annually, but we can carry forward the unused losses to offset future years that show gains (or the gain when we eventually sell the property).

[Ryan]

One rental here and I’ve done taxes myself through Turbo Tax. I don’t think it’s that complicated. Look at Sch E and track along with Turbo Tax.

It’s the same. I wouldn’t pay more for tax prep just because of a rental.

Definitely keep track of all of your repair costs and other outlays to make it easy.

Not sure if your rental is local…mine was but we moved out of state and now I have to file a separate state tax return just for that rental income.

You can also write off mileage for one trip per year to inspect your rental if you’re not local.

[Stephanie]

Given that your rental is in a trust, I would utilize an EA for at least the first year.

Depending on the type of trust, a separate return could be necessary.

[Liz]

I’m a tax professional and wanted to weigh in and say that the most common mistake I see when people have self prepared a schedule E is in depreciation.

Do a little diligence there and you’ll probably be okay.

[Katrina]

Would agree with paying a tax professional do the first tax return with your rental on it so that they can provide tax guidance regarding the rental plus calculate the proper depreciation cost basis & method to use for your rental property.

Make sure to request a copy of the detailed depreciation schedule calculated by their software (not usually filed with the tax return).

Then try to duplicate their numbers/calculations on your TT software, if it all matches up, you should be ok filing your own tax return going forward.

[Author]

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