How to Calculate Income Taxes on Duplex Rental Properties
- 1). Obtain a Schedule E form from the IRS. The Schedule E form is used to file income and expenses from rental property with the IRS.
- 2). Calculate the amount of rent you received from your duplex rental property. The rent amount includes all rents paid during the fiscal year and any paid in advance. For example, your tenant may pay for January's rent on Dec. 26. Though January falls in the next fiscal year, you must still report the prepaid rent as earned income. So, if you receive $1,000 per month for 12 consecutive months, your rental income for your duplex is $12,000.
- 3). Add up the expenses you incurred during the fiscal year. Expenses include any improvements, repairs or state property taxes paid on the duplex rental property. For instance, if you hire a contractor to replace the roof of the duplex, the entire cost of the job is an expense. If your tenant performs the work and buys the materials for an improvement, you cannot write the amount as an expense.
- 4). Add the renter's security deposit to your income, if applicable. You can only add the security deposit to your rental income if you intend to keep part or all of the amount after the tenant leaves. Otherwise, you do not add the security deposit to your income for the fiscal year.
- 5). Fill out the Schedule E form with your calculated income and expenses. Using the form, you can see the taxable amount of income from your rental property. For example, if you earned $12,000 from rental income, but had $7,000 in expenses, your income from your duplex rental would total $5,000. Include the form with your 1040 form when filing your return for the year.
- 6). Add the rental income to your total income on your 1040 tax return. The income tax you pay on your rental income depends on your regular income for the fiscal year. For example, if you were a single filer who earned approximately $30,000 from your job in 2010, and you added $5,000 to your income from the duplex, your tax liability increased by approximately $900.
