On which schedule should I record property income

by Jamshed Gandi, CPA / CFP / CVA

I'm a real estate professional with several rental properties. I've been reporting property income on Schedule E. I've been told, however, that I can combine Schedule E with my Schedule C and thereby reduce my self-employment tax. Is this true?

A Schedule C is for the reporting of business income and or losses, whereas a Schedule E is used to report rental income and or losses. The income that is earned that is reflected on your Schedule C is subject to self-employment taxes, whereas the income reflected on your Schedule E is not.

It would be incorrect to combine your rental activities with your other business income or losses on Schedule C to decrease your self-employment income.

Since you have several rental properties, you may want to consider the real estate tax professional election if you have not already done that, provided you meet the tests to do that. This would allow you to aggregate your several activities into one activity. This may help you to use passive losses from activities that otherwise may be disallowed. Making this election may not be beneficial if there are previous suspended passive losses being carried over.

Jamshed Gandi, CPA / CFP / CVA, is a stockholder in the firm of RINA Accountancy Corp. in San Francisco. You can reach him at (415) 777-4488(415) 777-4488.

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