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Rental property is owned by individuals when the owner or owners take title in their own names, not in the name of a business entity such as a partnership or limited liability company. Individuals file IRS Schedule E, Supplemental Income and Loss, to report their rental income and expenses. On this form you list all your expenses and income you received during the year from all your rental properties. If you earned a profit, you add this amount to your other income (such as salary from a job, interest income, or investment ­income) and report the total on IRS Form 1040. If you incurred a loss, you may be able to deduct it from your other income, but there are severe restrictions on such deductions.


Landlords who own their properties through business entities don’t use ­individual Schedule Es to report their rental income or losses. Instead, the partnership, limited partnership, LLC, or S corporation files IRS Form 8825, Rental Real Estate Income and Expenses of a Partnership or an S Corporation, to report the income and deductions from the property owned by the entity. This form is very similar to Schedule E.


LLCs with only one member are ordinarily treated like a sole proprietor­ship for tax ­purposes. The member reports profits, losses, and deductions on Schedule E. An LLC with two or more members is treated like a partnership for tax purposes, except in the unusual situation where the owners choose to have it treated like a C or S corporation.
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