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Rental Income: Understanding Tax Statements and 1099s in San Mateo, CA

Rental Income: Understanding Tax Statements and 1099s in San Mateo, CA

The average annual pay for a California landlord is $91,852. Top earners make six figures with an annual salary of $138,166.

You can make this type of money as a San Mateo, CA, landlord but you have to factor in paying for employees, rental property management, and taxes.

With the right accounting practices in place, you can organize your tax statements and 1099s for tax season. Keep reading to learn more about these forms.

What Is a 1099 Form?

A 1099 form is a collection of documents used to report different types of businesses or individuals receiving income. The purpose of these forms is to provide tax reporting information to the IRS.

New IRS rules took effect this year (2024) lowering the reporting threshold from $20,000 to $5,000. Landlords don't need to report or file 1099 forms for rental income under $5,000.

When you work with a property management company, they will provide you with a 1099-K reporting form. If you aren't given this document, you'll have to file the IRS 1099-MISC form yourself.

You'll use the form to report all rental income received in a year every month.

Types of 1099 Forms

1099 filing requirements differ based on the type of form you need. There are a few varieties of tax statements and 1099s. Knowing about each of them will help you understand which to use for income reporting.

Form 1099-MISC

This form is designed for declaring various income types. If you receive miscellaneous income through cash, physical checks, or money transfers, use this form to report income.

Form 1099-NEC

Form 1099-NEC is required for reporting non-employee compensation, such as payments made to freelancers or independent contractors. If you hired an outside maintenance coordinator, for example, you'd need to use this form.

This tax form is required when payments exceed more than $600 for the entire year to contractors.

Another typical example of using a Form 1099-NEC is to pay for incurred attorney fees.

Form 1099-K

This form is required by the IRS from third-party processing vendors and online rent collection platforms. It's used to report rental income paid to property owners through digital services.

Landlord Tax Deductions

The great thing about being a landlord is that you can deduct some of your rental expenses each year. It's important to keep rental property tax statements to ensure you are correctly filing your taxes.

Some of the most common deductions include:

  • Depreciation expenses
  • Landlord insurance costs
  • Security and monitoring systems
  • Landlord software fees
  • Office space expenses
  • Property management fees
  • Repairs and maintenance costs

Accurately tracking and reporting expenses is key to staying tax-compliant. A rental property management company can help you understand the recent updates. Plus, their fees are tax deductible.

Tax Statements and 1099s: The Bottom Line

Going through tax statements and 1099s is a lot to digest. Implement an accounting system to track income and expenses all year long to have clarity on the financial health of your property.

At Five Star Property Management, we have tax and accounting backgrounds that can prepare you for tax season. Many companies overlook the little details when it comes to accounting, but we know these details are important.

With local experience in San Mateo, CA, we are up to date on rental property rules and regulations. Contact us today to increase your income and decrease your liability.