As a real estate investor, there are a lot of things you have to think about. Are your investments profitable? Can you earn your desired rate of return, and more?
Of course, one of the biggest concerns with any real estate investment is tax statements and 1099s.
Even the most seasoned real estate investor can get bogged down in tax paperwork. So as a newer real estate investor or someone just looking to learn the ins and outs, you may have questions about the tax process for real estate.
This article will highlight some essential tax-related information regarding real estate for San Francisco bay property managers. Here's what you need to know about tax statements and 1099s in real estate.
Tax Statements and 1099s
When you are an employee, your company sends you a W-2 to report your income. As a real estate investor, you will receive a tax statement known as a 1099 form. This form reports any income you earn from self-employment, interest, dividends, or rental income from tenants.
A 1099 Form will also show the entire gross income paid to you, unlike a W-2. This means that no taxes are withheld, and you are responsible for understanding what your tax contribution has to be.
There is also a similar form called a form 1099-S, another tax statement related to real estate. If you plan on selling a rental property or home that has been accurately reported, you should fill out this form. You will have to pay capital gains tax when you file your taxes in the following year.
It is valuable to know that for any rent paid to you in the amount of $600 or more, you must file a form 1099.
For example, if your San Francisco Bay Property Management Company paid for office space and were paid rent, you have to use a Form 1099- MISC to report the rent paid.
California Specific Tax Information
California does have specific tax information that has to be submitted when you have real estate. The California Employment Development Department mandates that you, the real estate investor, must file 1099 Forms only if there is a state tax withholding.
This includes if you are a permanent California resident or reside in the state for part-year.
How to Make Filing Taxes Easier as a Real Estate Investors
One of the best ways to make filing taxes more manageable as a Real Estate Investor is to make sure to have all of your tax statements readily available. This means any 1099- MISC forms you receive you want to keep them in a designated area.
If your tax files are electronic, make sure you have a backup drive if anything happens to your computer. It can be a good idea to put away additional funds just in case your tax responsibility is more than you initially accounted for.
It can also be a good idea to work with a dedicated accountant or tax advisor to make sure your real estate taxes are paid properly to avoid any financial mishaps.
Keep Building Your San Francisco Bay Property Management Company!
As you can see, you need to understand your tax statements and 1099s as a real estate investor. At the same time, every state has its unique requirements for real estate investors.
If you need help understanding your tax statements and 1099s as one of San Francisco Bay Property Managers, reach out to us today to get the help you need.
Evan has been in the real estate and property management field for 6+ years. He is experienced in working with first time home buyers, is an Accredited Buyer’s Representative (ABR®), Seller Representative Specialist® (SRS) and Seniors Real Estate Specialist®(SRES®). He also works closely with Kenny Realty owners, getting their rental properties rented as quickly as possible. Evan is responsible for monitoring rental market conditions and advising our owners on market rates. He has outstanding communication with all clients he works with, keeping everyone in the loop at all times. He is the third generation of the Kenny family to practice property management on the peninsula.