Rental Income and how it shows up on your Taxes as Income ??

Question

Can someone please help me in understanding the way in which the Rental Income received will be " Counted for " on my 2017 taxes .Example:Let's say I received  $15,000  from 2 rentals for the year 2017 Would this Rental Income be Added with the Money I make from my Job ?Continuing the Example ........... If I made  $30,000 from work in 2017 and  $15,000  (  received  ) Rental Income from 2017 , would the two of these be added together , showing a combined Earned Income of  $45,000  ?I want to make sure that Lenders will use the  $15,000 from Rental Income , in my Overall Gross Income in their calculations for my  DTI , etc.   Thanks so much for the help

Can someone please help me in understanding the way in which the Rental Income received will be " Counted for " on my 2017 taxes .

Example:Let's say I received  $15,000  from 2 rentals for the year 2017 Would this Rental Income be Added with the Money I make from my Job ?Continuing the Example ........... If I made  $30,000 from work in 2017 and  $15,000  (  received  ) Rental Income from 2017 , would the two of these be added together , showing a combined Earned Income of  $45,000  ?I want to make sure that Lenders will use the  $15,000 from Rental Income , in my Overall Gross Income in their calculations for my  DTI , etc.   Thanks so much for the help

Let's say I received  $15,000  from 2 rentals for the year 2017 Would this Rental Income be Added with the Money I make from my Job ?Continuing the Example ........... If I made  $30,000 from work in 2017 and  $15,000  (  received  ) Rental Income from 2017 , would the two of these be added together , showing a combined Earned Income of  $45,000  ?I want to make sure that Lenders will use the  $15,000 from Rental Income , in my Overall Gross Income in their calculations for my  DTI , etc.   Thanks so much for the help

Would this Rental Income be Added with the Money I make from my Job ?

Continuing the Example ........... If I made  $30,000 from work in 2017 and  $15,000  (  received  ) Rental Income from 2017 , would the two of these be added together , showing a combined Earned Income of  $45,000  ?I want to make sure that Lenders will use the  $15,000 from Rental Income , in my Overall Gross Income in their calculations for my  DTI , etc.   Thanks so much for the help

I want to make sure that Lenders will use the  $15,000 from Rental Income , in my Overall Gross Income in their calculations for my  DTI , etc.   Thanks so much for the help

I want to make sure that Lenders will use the  $15,000 from Rental Income , in my Overall Gross Income in their calculations for my  DTI , etc.

Thanks so much for the help

Michael Dunn · Answer

Harjeet Bhatti ,

I thank you for your reply too

To my most previous reply ........... using 75% of Gross Rental Income as the amount that most Lenders will use in their calculations............ It's safe to assume that  $11,000 with be the " Gross " / number that the Lender will use, when factoring in the amount of which I qualify for, in regards to getting a loan ............... the  $11,000  +  what I ear from my Current Job ?

Michael Dunn · Answer

James Qiu ,

those are Great Point, thank you for sharing

I am Not a real-estate professional ......... just someone who is trying to accumulate some Rental / Investment properties :)

I had forgotten that they will only use 75% of Monthly Income I receive , in their calculations .

Given this , i can safely assume, that for a Monthly " Income " from Rental income alone.............  They'll use  $950 as my GROSS monthly Rental Income ?   So about  $11,000 total for the year ?

Michael Dunn · Answer

Chris Mason ,

Thank you for your reply

I have found a Portfolio Lender here in my area, and from talking with my Lender with whom i initially purchased the Property through , she stated that they are Very Investment Property friendly

For 2016 taxes, i took the full amount of Deductions and Depreciation as i could, as to lower the Amount I'd have to pay taxes on , ENEN THOUGH It shows my Gross Income ( as a whole ) as a lot less , had I NOT taken all the Deductions and Depreciation .  My Lender said not to worry about the " Low " number that it is showing on my Schedule E , as this Lender  ( the local Portfolio Lender , of whom she has done lots of business with over the years ) , will look at the amount of Rental Income I took in , IN TOTAL , and not the number that is left at the Bottom of my Schedule E  9 the Low number from taking the Losses/Deductions/Depreciation ) ............ She said I'd be fine  :)

I am just wanting to confirm this, and here from others, if they too have found Investment Property friendly Lenders who Look at the Amount of Rental Income  via the BEFORE amount

If everything looks good, and this local portfolio Lender looks at my Schedule E in the way in which I was told, then I will likely for 2017's taxes, go ahead and take as many Deductions and Depreciations as I can ............. Less I have to pay Taxes on  :)

Harjeet Bhatti · Answer

$15000 income will be in Schedule E as gross rent- all the related expenses will deducted and net income or loss will be on your tax return.

James Qiu · Answer

I think you're asking two different questions.

1. What's counted as rental income when filing taxes?

2. What's counted as income towards DTI ratio.

For 1, the income is always the net income (eg. rent - all expenses and depreciation). In your example, I'm assuming $15K is your gross rent, so your actual net income is probably much lower (reported on Sch E). Also depending on if you're real-estate professional or not, you may or may not be able to deduct rental loss against your W2 income. For 2, different lender has different treatment wrt rental income. The more strict ones only count 75% of your gross rent but 100% of your expenses (without depreciation). It's to assume that 25% of the time, your rental will be vacant.

Chris Mason · Answer

Hi Michael,

The full answer if you're a DIY sort can be found here, the worksheets at the bottom and the info above it.

The intuitive answer is that, assuming an REI friendly lender and honest tax returns, the accurate cashflow of each property will be calculated, and you shouldn't be worried about DTI if you are buying good cashflow positive real estate.

If someone is telling you that DTI is an issue, one of three possibilities...

• That lender isn't REI friendly. This is probably the most common issue REI face in this area.
• You lied on your taxes. No one to blame for that one but yourself. :)
• You're not buying good cashflow positive real estate. People that invest primarily for appreciation come up against this. Probably most common here in the Bay Area, these folks need solid dayjob income to make up for the cashflow negative real estate screwing with their DTI.

Other than that, you shouldn't be worried about DTI.