Schedule e

[Jeff Gates]

Do all landlords fill this out by themselves? 

[Michael Boyer]

Hi Jeff, 

It is a great question for this time of year..... It is also like many landlord questions (whether a plumbing leak or broken appliance) in your analysis of whether to DIY or call a pro (e.g., CPA)... 

Think about your own skills and whether it will be more efficient to tackle the task yourself or hand it off.. 

I do think a clever small-scale landlord with the right background can handle a Schedule E, but I also know many people without any background or experience in tax would be better off with a great CPA (especially one with a REI background and/or other real estate investor clients)... Keep in mind opportunity costs as well as the risks of an error (or audit!)

My best diagnostic that has worked for some other landlords I know goes something like this: 

1) Have you done your own taxes before (1040 itemized) with some more complicated calculations (like capital gains or tax credits)..... If so, you could make the leap to tackle the Schedule E (proceed to #2 if yes.. If no, call a great CPA)...

2) Do you understand concepts like depreciation and what constitutes a business expense? (If yes, see number #3, if no, call a great CPA)...

3) Do all the Schedule E categories make sense and can you see how your income and expenses (you kept great records all year right?) fit into the categories? Or are there too many areas where you are uncertain, like what is a repair versus an improvement, how to depreciate something, or how to handle an issue like auto expenses?..... If it looks clear, maybe give it a try... If there is too much gray area or potential stress, consider using a professional... Also, consider calling a pro if you have a complicated out of the norm issue during the year....

As many landlords have discovered, there is is help out there... I buy a couple of books every year....For example, you can browse books like Stephen Fishman's Every Landlord's Guide to Tax Deductions (I did a Nolo book--but no interest in that one other than liking it) or even JK Lasser's has some decent real estate coverage updated annually, and, of course, the IRS publications can help... Best of luck!