Q: As a Property Manager/Realtor can I deduct rents collected and then forwarded to owner of property they own?
State of Indiana is not allowing me this deduction. Should I be using schedule E vs Schedule C?
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A:
When managing properties and forwarding rents to owners, it’s important to distinguish between your income and the funds you handle. Typically, the rent you collect and pass on to property owners isn’t your income, so you wouldn’t deduct those amounts. Instead, your income comes from any management fees or commissions you earn for your services.
Using Schedule E is generally for reporting income and expenses related to rental properties you own. However, since you’re acting as a property manager for others, Schedule C might be more appropriate for your business activities. This allows you to deduct legitimate business expenses related to managing the properties, such as advertising, office supplies, and transportation costs.
Indiana’s specific regulations may have unique requirements or restrictions on these deductions. It’s crucial to ensure you’re categorizing your income and expenses correctly based on your role. Reviewing the IRS guidelines for Schedule C and Schedule E can provide clarity, and keeping detailed records will support your filings. If issues persist, consulting with a tax professional familiar with Indiana’s tax laws could help resolve the deduction challenges you’re facing.
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