Does your rental property activity meet the definition of a trade or business activity?

If “yes,” your rentals produce the best possible tax benefits.

In general, you report your rental properties on Schedule E of your tax return. When your activity rises to that of a business, you continue to report the rentals on Schedule E, but with business classification you qualify for

tax favored Section 1231 treatment;

business use of an office in your home;

business (versus investment) treatment of meetings seminars, and conventions; and

Section 179 treatment on your business-use assets.

Rental as a Business

In Levy,1 the court ruled that the trustees of this estate, by renting the real estate, were engaged in a trade or business. This court then went on to say:2

Courts have consistently held that the rental of real estate is a "trade or business" if the taxpayer-lessor ... Log in to view full article.