rental income tax reporting

Just report them on the expense section of Schedule E. However if you participated on these rentals as if it were your full time job, spending lots of hours on it. then report on Schedule C and be happy to pay SE tax and face no limitations of losses.

This goes on your personal Schedule B.

Sure, deduct it on schedule E.

Probably deduct on Schedule E as well.

Thanks for the reply. I am still a bit confused.

1] If I report my business bank account interest on schedule B, it will surely get taxed even though my rental business itself may be at loss (and the loss may have to be carried over to the next years)

2] The loss as reported on schedule E seems to be property specific. If I sell one property later and make a profit, can ALL the previous lose from ALL the properties be deducted? Or will I end up paying tax on the profit of that particular property and still carry over loss on other properties? (.... thought all the properties are owned by the same LLC)

Thanks.

Allocated across the properties on Schedule E. A reasonable allocation is for the part of insurance dependent on the properties' values, to allocate per the ratio of the values, and equal shares for the remainder.

Not deductible. Had you succeeded, this would have been a capital cost, but as it failed, you have nothing to capitalize it into.

(re-post from my response to the previous answer) If I report my business bank account interest on schedule B, it will surely get taxed even though my rental business itself may be at loss (and the loss may have to be carried over to the next years) ...

e.g. if my AGI exceeds $150K, I cannot claim any rental loss, but why I should count this business interest as personal interest that will get taxed?

This sounds a bit counter-intuitive. This looks to me a perfect normal business expense. And I would guess these should be counted as "expense" (similar to closing cost?), should the transaction succeeded. If you paid for legal advice or survey in the course of doing business, why it is not deductible expense (especially there are rental income from other property the same LLC owns)?

It might not make sense but that's the rule. Look at the bright side: If your sole proprietorship (Schedule C) business had interest, by reporting it on Schedule B you don't get to pay any SE tax.

I could be wrong but I think that you can combine all of your properties on one Schedule E page 1. Box 1 even lets you write in 3 addresses, but may the electronic version lets you use unlimited rentals. Anyway, even if you have multiple Schedule E, it looks like you can combine gain on one with loss on another. I created a test person of income 200k, rental loss of 10k on first E, and gain of 12k on second E, and net gain was 2k.

Since it failed it ought to be deductible as an expense as it is "ordinary and necessary" in the course of business.

Agree that it may help avoid SE tax. But in this case, the 1099-INT is issued to the LLC's EIN instead of my SSN and it will for sure increase my tax bill. Also I guess many small business will have such earnings on their business accounts. Therefore I am quite surprised to see there is no proper place to report such income. The only place I can see is "other income not reported elsewhere" ... puzzled.

I think it ought to be deductible expense too. But the question is where to report on schedule E? Proportionally distributed among owned rental properties?

Somehow I feel it's more natural to report on schedule C if one owns multiple properties and especially through a LLC (thus having some general expense, e.g. business entity tax, general expense such as above, which are not property specific.) But somehow IRS publication seems to have very strict rules (but sometimes quite vague description) on reporting schedule C. Any opinions / comments on reporting rental income using schedule C instead of E, while not to catch unnecessary IRS "suspicion"?

There is a proper place, Schedule B, as you've been told over and over. No matter how many times you ask the question or how many arguments you advance, the answer isn't going to change. You seem to be forgetting that the single-member LLC is a disregarded entity. If you really want to get that interest off Schedule B, elect to have the LLC taxed as a C corp. I don't think you'd care for the outcome.

Phil Marti VITA/TCE Volunteer Clarksburg, MD

I am going to file it on schedule B ... just thought it's kind of "inconsistent" because one may end up paying tax on while still making loss overall for his business.

In addition to gross income, there are places for royalties and rents which usually are passive income similar to interest. So I think it's a legimate question to ask why interests on business account should be put on schedule B. ... That said, it is probably a similar thing as dividend and capital gain - You have to pay tax on dividend while you may suffer a loss on stock trading, even though dividend income is derived from your stock trading.

Think of it this way - what is the "purpose" of the business? It's to sell widgets or to consult on alien abductions, or some other such thing. Unless you're a bank, lending out money and collecting interest is not one of the activities that fall within that purpose. So the interest is not "business income".

Don EA in Upstate NY

I don't agree with your paragraph. It seems you're trying to divine logic in something that has no logic.

So? You're an LLC which is not a recognized entity. Therefore, there is no "business" bank account, nor is interest income considered passive.

I don't care how it sounds. What matters is that is the treatment. Acquisition costs get capitalized, but you have no capital account in which to add it.

...And just what business is that ordinary to?

"Welcome to income tax 101!" ;-)

Sorry, but I don't follow your logic.

I (as an individual) do not make a living by lending out money, but interests earned on my personal account still counts as my personal income. So why an interest earned on a business account does not count?

OK, let me give you some other better examples of not-property- specific expenses: LLC registration fee, business entity tax etc. Are they not "ordinary and neccessary" in the course of business?

My question was "where to put them"? "Spreading among different properties", though messy, can be an answer. But you cannto deny there are legimate business expenses that are not property specific.

All businesses have transactions that fail or fall through. It's just part of doing business.

In order to avoid what the IRS thinks of as loopholes or tricks that distort income, income and expenses are divided into different types

- business, investment, personal... Each is treated separately, and in some cases differently.

Yes, it seems stupid. But that is the rule at the moment. ___ Stu