Tax on Rental Income

From Rental Properties to Partnerships Navigating Complex Multi-State Tax Situations

If you’re managing rental properties or partnerships across multiple states, you already know the drill—every state has its own tax rules, deadlines, and hoops to jump through. It’s like trying to assemble a puzzle when each piece is cut from a different box. You might be wondering: Am I filing everything correctly? Am I missing out on deductions? Could I be overpaying?

You don’t have to figure it out alone. At Insogna CPA, we specialize in making multi-state taxes simple for people like you. We handle the complexities so you can focus on what matters—growing your investments, scaling your business, and enjoying the peace of mind you deserve.

What Makes Multi-State Taxes So Overwhelming?

Every state plays by its own rules, and if you’re not careful, those rules can create a ripple effect across your finances. Maybe your rental property in Arizona has different depreciation rules than your home base in Texas. Or perhaps your partnership income is split across multiple states, each with unique reporting requirements. These small differences can have a big impact on your bottom line—and mistakes can be costly.

But here’s the good news: with the right team in your corner, these challenges can turn into opportunities.

We Make Multi-State Taxes Work for You

At Insogna CPA, we go beyond basic compliance. We’re here to help you optimize your tax outcomes while keeping everything above board. You’ll benefit from:

1️⃣ State-Specific Expertise: We know the ins and outs of state tax laws—from California’s franchise taxes to Florida’s rental income exemptions—and how they apply to your situation.
2️⃣ Minimized Tax Burdens: Our proactive approach ensures you’re not paying a dollar more than necessary, while still keeping you compliant.
3️⃣ No Surprises, Ever: We stay ahead of changing tax laws, so you don’t have to scramble at the last minute.

Imagine having a team that takes the stress out of multi-state filings while finding new ways to save you money.

Tax-Saving Strategies Tailored to You

Whether you own a handful of rental properties or manage a complex partnership, we’ll help you unlock tax savings you didn’t even know were possible:

✅ Optimized Legal Structures: We’ll guide you in choosing the best structure (LLC, partnership, or corporation) to protect your assets and reduce taxes.
✅ Maximized Deductions: From renewable energy credits to local tax incentives, we identify every opportunity to lower your tax bill.
✅ Strategic Depreciation: Accelerating your depreciation schedule can put more cash back in your pocket for future investments.

Why Insogna CPA? Because We Put You First

At Insogna CPA, we understand what’s at stake for you—not just compliance, but the success and growth of your investments. That’s why we offer more than tax preparation; we provide personalized, concierge-level service designed to make your life easier.

You’ll never feel like just another client. We prioritize clear communication, thoughtful strategies, and solutions tailored to your goals. When you partner with us, you’ll feel supported, empowered, and confident that your taxes are in expert hands.

Stop Stressing Over Multi-State Taxes

You shouldn’t have to waste another minute worrying about tax filings, compliance, or missed opportunities. Let us take the burden off your shoulders and show you how seamless managing multi-state taxes can be.

Call us today to schedule a consultation, and let’s start transforming your tax challenges into opportunities. Together, we’ll ensure your investments are working as hard as you are.

Is My Rental Property Considered a Business?

“I have a rental property. Can I write off business expenses or losses against my personal income?”

We get many questions about rental property, particularly, “How can I report my rental property as a business so I can write off my losses against my personal 1040 adjusted gross income?”

Several IRS factors determine whether you can claim your rental property as a Schedule C business or a Schedule E. The primary factor is whether you’re providing substantial services to your rental guests regularly.

Understanding Passive Activity

A passive rental typically occurs when someone owns a rental that is leased for more than seven days at a time or if the operations are managed by a property manager. These are the two most common tests, though not the only ones, that the IRS uses when reviewing a taxpayer’s return.

🏡 Passive Income from Your Rental Property

Generally, most rental profit and loss are considered passive, and a Schedule E is filed. If your rental shows a taxable loss, as a passive taxpayer, you can only deduct this loss against other passive income—not against your W2 wages or investment income. This is why many taxpayers hope to classify their rental real estate as a Schedule C business to offset losses against their W2 income.

❓ What Does the IRS Consider for My Rental to Qualify as a Business?

The IRS looks at whether the property you’re renting qualifies as a “business” by determining if you provide substantial services in conjunction with your rental.

Insubstantial Services

Some activities don’t count as “substantial services” and will typically require you to file under Schedule E on your personal tax return. These include:

✅ Providing basic utilities (heating, lighting, internet, etc.)
✅ Basic cleaning of common areas and grounds
✅ Trash services
✅ Paying bills and tracking income and expenses
✅ Performing your own repairs and maintenance

If these are the primary services you provide, your rental is likely considered passive, and you’ll file a Schedule E.

Substantial Services

On the other hand, if you’re providing services similar to those of a hotel, your rental may qualify as a business under Schedule C. These services might include:

✅ Regular cleaning services for guests
✅ Changing linens during a guest’s stay
✅ Offering tours, outings, or concierge-type services
✅ Physically preparing meals for guests
✅ Providing guest transportation

These services indicate that you’re operating a business, allowing your rental property to be classified under Schedule C.

❓What If You Provide Services to Your Guests?

Let’s say your rental property is a small bed and breakfast, and the average stay is less than seven days. If you’re providing substantial services like daily cleaning and meal preparation, you may be able to file as a Schedule C business. This can mean taxable rental profits are subject to self-employment tax, but it also allows you to deduct rental losses against W2 income, potentially lowering your overall taxable income.

For longer-term rentals (over seven days or month-to-month), or if you rent a room in your main residence, the IRS generally considers these passive activities. In this case, your rental would be classified as passive, and losses can only offset other passive gains.

💡 So… Can I Claim My Rental Property as a Business for Tax Purposes?

Whether you’re a casual renter or the owner of multiple rental units, most rental property owners are surprised to learn they can’t claim their rental real estate as a Schedule C business unless substantial services are being provided. The IRS sets a high bar for taxpayers looking to offset losses, so it’s crucial to understand the rules.

✅ Stay on the Right Side of the IRS

Navigating the IRS rules for rental real estate can be complex, and there’s a lot at stake. Keeping your rental activity compliant is essential to avoid audits and penalties. Make sure to classify your rental correctly—whether it’s passive or active—so you can maximize your tax benefits.

Our founder has over 15 rental properties, so we understand the complexities firsthand. At Insogna CPA, we help clients navigate the rules of rental property taxation, ensuring you’re making the most of your rental real estate. Reach out today to see how we can help you maximize your profits while staying on the IRS’s good side.

Short-Term Rentals and Taxes Explained in 2024

These special (and sometimes complex) taxation rules are based upon the length of time you rent your property out and with varying tax outcomes. In some situations, the rental income may be tax-free. In other situations, your rental income and expenses may need to be treated as a business, as opposed to a rental activity. The following is a general synopsis of the rules governing short-term rentals (those rented for average rental periods of 30 days or less).

📌 Rented for Fewer Than 15 Days During the Year

When a property is rented for fewer than 15 days during the tax year, the rental income is not reportable, and the expenses associated with that rental are not deductible. Interest and property taxes are not prorated, and the full amounts of the qualified mortgage interest and property taxes are reported as itemized deductions (as usual) on the taxpayer’s Schedule A.

💡 The 7-Day and 30-Day Rules

Rentals are generally passive activities.

However, an activity is not treated as a rental if either of these statements applies:

1️⃣ The average customer use of the property is for 7 days or fewer—or for 30 days or fewer if the owner (or someone on the owner’s behalf) provides significant personal services.
2️⃣ The owner (or someone on the owner’s behalf) provides extraordinary personal services without regard to the property’s average period of customer use.

If the activity is not treated as a rental, then it will be treated as a trade or business, and the income and expenses, including prorated interest and taxes, will be reported on Schedule C instead of Schedule E, the IRS form used to report longer-term real estate rentals. IRS Publication 527 states: “If you provide substantial services that are primarily for your tenant’s convenience, such as regular cleaning, changing linen, or maid service, you report your rental income and expenses on Schedule C.” Substantial services do not include furnishing heat and light, cleaning public areas, collecting trash, and such.

💡 Exception to the 30-Day Rule

If the personal services provided are similar to those that generally are provided in connection with long-term rentals of high-grade commercial or residential real property (such as public area cleaning and trash collection), and if the rental also includes maid and linen services that cost less than 10% of the rental fee, then the personal services are neither significant nor extraordinary for the purposes of the 30-day rule.

💵 Profits and Losses on Schedule C

Profit from a rental activity is not subject to self-employment tax, but a profitable rental activity that is reported as a business on Schedule C is subject to this tax.

A loss from this type of activity is still treated as a passive activity loss unless the taxpayer meets the material participation test – generally, providing 500 or more hours of personal services during the year or qualifying as a real estate professional.

Losses from passive activities are deductible only up to the passive income amount, but unused losses can be carried forward to future years. A special allowance for real-estate rental activities with active participation permits a loss against nonpassive income of up to $25,000 – but phases out when one’s modified adjusted gross income is between $100K and $150K. However, this allowance does NOT apply when the activity is reported on Schedule C.

Rental Property Tax Help

Navigating the tax rules for short-term rentals can feel overwhelming, but you don’t have to do it alone. Reach out today, and we’ll work with you to ensure you’re maximizing the tax benefits for your rental property and avoiding any costly surprises. Let us help you turn those short-term rentals into long-term wins for your finances in 2024!

What Real Estate Investors Need to Know in 2024: Smart Moves for Your Property Investments

Real estate investing can enhance the risk-and-return profile of your portfolio, offering competitive returns. But let’s be honest—without proper guidance, navigating property investments can feel like you’re wandering in the dark. Don’t worry, though. We’ve got your back with some practical tips and insights to keep you on track in 2024.

Check out these must-read articles for real estate investors:

Need Help?

Whether you’re new to real estate investing or a seasoned pro, navigating the tax landscape can make or break your returns. Don’t go it alone—reach out to us today, and let’s maximize your property investments together!

Rental Property Tax Deductions for Landlords

Many of our clients own rental properties, whether as their main business or part of a diverse entrepreneurial portfolio. At Insogna CPA, we specialize in helping property owners maximize their rental property tax deductions and reduce tax burdens with strategies that work.

Insogna CPA: Your Rental Property Tax Experts

Our deep knowledge and personal experience with real estate taxes for rental properties is an assurance that our team is up-to-date on every tax-advantaged strategy available to owners, including:

In fact, our founder and CEO, Chase Insogna, a licensed CPA, personally owns several rental properties.

Key Rental Property Tax Deductions to Consider

Depreciation is often the first deduction rental property owners think about, but it’s far from the only one. Here’s a quick rundown of other valuable tax breaks available for landlords in 2024:

📌 Advertising costs for listing the property
📌 Auto expenses for property-related travel
📌 Cleaning & maintenance fees
📌 Management fees for overseeing the property
📌 Supplies needed for property upkeep
📌 Taxes such as property taxes
📌 Utilities like water, gas, and electricity
📌 Property & liability insurance
📌 Mortgage interest, typically reported on Form 1098
📌 Repairs, whether it’s fixing a leaky roof or repairing appliances
📌 Legal & tax preparation fees tied to rental activity
📌 Non-mortgage interest, such as interest on a credit card used solely for property expenses
📌 Travel expenses for overnight trips to improve your property

Maximize Your Rental Property Tax Deductions in 2024

Ready to keep more of what you earn as a landlord? Let us guide you through every available deduction to maximize your rental property tax savings this year. Schedule a call with us today, and let’s make sure you’re not leaving money on the table.