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Tax Trails - Self-Employment Income

REAL ESTATE DEALERS - If you are a real estate dealer, include in self-employment income rent you receive in the course of your trade or business. You are a real estate dealer if you are engaged in the business of selling real estate to customers with the purpose of making a profit from those sales.

HOTELS, APARTMENTS, ETC. - Rents received from the use of or occupancy of hotels, boarding houses, or apartment houses are included in self-employment income IF you provide services to the occupants. Services considered provided to the occupants are services primarily provided for the convenience of the occupants and not normally provided with the rental of rooms or space for occupancy only. Maid service, for example, is a service provided for the convenience of occupants, while heat and light, cleaning of stairways and the collection of trash are not.

TRAILER PARK OWNERS - Rent received by trailer park owners is rent from real estate activities. Owners do not include it in self-employment income unless the services they provide are substantial and for the convenience of tenants. Services that are substantial and for the convenience of tenants include supervising and maintaining a recreational hall, operating a laundry facility, and helping tenants buy or sell their trailers. Owners providing substantial services include the rental income in self-employment income.

Figure your net earnings from self-employment on Schedule C (Form 1040) (.pdf), Net Profit or Loss From Business. Generally, figure your net rental income that is not self-employment income on Schedule E (Form 1040) (.pdf), Supplemental Income and Loss. Do not use Schedule E if the rental income is from a business that is a qualified joint venture you and your spouse conduct.

Figure your self-employment tax on Schedule SE (Form 1040) (.pdf), Self-Employment Tax. Do not use Schedule SE for income that you report as rental income on Schedule E.

If you earn or receive income during the year that is not subject to withholding or you do not have enough tax withheld, you may have to pay estimated tax. If you do not pay enough tax during the year through withholding or by making estimated tax payments, you may have to pay a penalty.

For more information on residential rental income, refer to Publication 527, Residential Rental Property (Including Rental of Vacation Homes). For more information on estimated tax, refer to Chapter 2 of Publication 505, Tax Withholding and Estimated Tax.

 

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Page Last Reviewed or Updated: 01-Jan-2015