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Tax Trails - Self-Employment Income

Rents

REAL ESTATE DEALERS - If you're a real estate dealer, include in self-employment income rent you receive in the course of your trade or business. You're a real estate dealer if you're 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 don't 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), Net Profit or Loss From Business (Sole Proprietorship). Generally, figure your net rental income that's not self-employment income on Schedule E (Form 1040), Supplemental Income and Loss. Don't 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), Self-Employment Tax. Don't use Schedule SE for income that you report as rental income on Schedule E.

If you earn or receive income during the year that's not subject to withholding or you don't have enough tax withheld, you may have to pay estimated tax. If you don't pay enough tax during the year through withholding or by making estimated tax payments, you may have to pay a penalty. See Tax Topic 306Penalty for Underpayment of Estimated Tax.

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, and Tax Trails - Do You Have to Pay Estimated Tax?

 

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Page Last Reviewed or Updated: 19-Jan-2017