There are a few different tax software programs that will work for you. Of course, none of them will do all the work for you, but some options may make your books and report more accurate. For example, if you use an online service like Mint to track income and expenses, there may be an option to report those transactions directly into your tax software. You can also manually enter transactions. To have a better understanding of which tax software is best for a rental property, we went through some of the big names out there:
Find out if you need to file a tax return for your rental property
You need to file taxes for your rental property if you have more than $1,500 in income. If it’s not required, then only enter the transactions that apply to your rental business.
Rental expenses you can deduct
In addition to interest and property taxes, you can deduct a wide range of rental expenses from your income. This will help lower the net income on which your tax liability is calculated. However, you must remember that “net income” refers just to what you earned as a result of your rental property — it doesn’t include potential deductions for depreciation or other tax benefits. So, before you choose which type of rental property software to use, look at your records for the previous year and determine whether any of these deductions apply to you.
Enter income and expenses
If you’re using an online program like Mint with importing features, then the process is easy depending on what method you use to enter data. If you haven’t used Mint, there are some guides on setting up income and expenses here. You can also manually enter transactions for your rental property into the tax software of your choice.
How do I report depreciation?
Depreciation is not a standard deduction that is flowed through, like the Standard Deduction for your personal property or Schedules A for medical expenses. You must report this line item on the tax return. The cost is deducted from the purchase price of your property and reduces its value to you (and future buyers) over time using a depreciation schedule like MACRS.
How do I file my state taxes?
You can look up instructions for filing your state tax return online. Some states allow you to file directly on their website, while others require you to include a copy of the federal form 1040 with your state submission, and some may not even let you e-file. You can also use software like TurboTax or H&R Block, which charge a small fee but do all the work for you.
Is there a benefit to using specific software?
There is no “best tax software” because each person has different needs and preferences. However, it would help if you used the tax software you feel most comfortable with or what your accountant suggests. Also, if you are using property rental management software, you need to ensure it’s compatible with your chosen tax software.
The other option would be to ask your CPA which software they recommend and why. Sometimes accountants will charge you a fee to use their software, so you should know which they would recommend if you’re on a tight budget. On the other hand, if the accountant is recommending a specific program from their company, this may not be the best deal for you as it may cost more money in the long run.
Why should I use it over doing my taxes myself on paper?
The choice to use tax software is a personal preference. Some individuals prefer not to keep track of transactions and documents during the year, while others prefer the time savings associated with automating their financial tasks. A benefit of using a service is that it provides an audit assistance feature, which may be helpful for some, especially if they are unfamiliar with tax laws.
Many programs are for home-based owners only, how do I know which one is best for my rental?
A lot of tax software programs are designed initially to handle small business owners in mind. Still, some can take care of reporting your rental income and expenses. The most popular ones on the market with this feature are TurboTax Home & Business, H&R Block At Home, and TaxACT.
Can I import my previous year’s return?
All three offer the option to import data from the previous tax year if you had a CPA or used another software service, but be sure to check with each to see if they have any limitations. Remember that importing the data will only transfer over information relevant to your tax return, such as your occupation and income. Documents and expenses you need for calculating depreciation will not be imported and will need to be added manually.
Is there a maximum amount of rental income I can report?
TurboTax, TaxACT, and H&R Block all have a maximum amount of allowable rental income. TurboTax’s limit is $100,000, while TaxACT allows up to $100,000 for individuals filing singly or married couples filing jointly. The limit for H&R Block is $250,000 for individuals filing singly or married couples filing jointly.
Do I need to use my own purchased software or can I access the features on another website?
TurboTax, TaxACT, and H&R Block offer a version of their programs that can be accessed through a mobile application to help with tax calculations. TurboTax also has a free product called TurboTax Freedom Edition, which can be used without paying for the program. The only feature that is not accessible with this version is importing data from other software services.
TurboTax Home & Business offers an online application free of charge. With this service, there are two options for importing your previous year’s return information. You can either import data from another software service or use the online interview guide to answer questions about last year’s income and expenses.
Do I need any special education/credits to be able to use this program?
TurboTax, TaxACT, and H&R Block all have an option for beginners or do-it-yourselfers that best suits your skill level. All you have to do is answer a series of questions about your occupation and income, then follow the step-by-step instructions to complete your tax return.
TurboTax Home & Business is very similar, but it does offer a pro version that is more suited for individuals with a deeper understanding of tax laws and calculations.
H&R Block At Home has an option called “Ask An Expert,” where you can either chat live or email the customer support team to answer any questions about your return information. If you would rather receive help in person, there is a $59 fee to schedule an appointment with a tax professional.
TaxACT offers an option called “Live Community,” where you can talk with experienced tax preparers to get your questions answered. There is also an option on their website called “Ask A Tax Expert,” You can email them questions about completing your return information. If you would rather receive advice in person, there is a $49 fee for in-person support.
Which one is the easiest to use?
TurboTax and TaxACT offer an online application that allows you to complete your return information in an easy step-by-step process. You can either upload or import your previous year’s return data, which will only transfer over the relevant items for calculating your federal tax rate. Both also have an option called “DeductionPro,” to help you find all deductible expenses that are often overlooked when filing a return manually.
TurboTax has been recommended as one of the best options overall because it can guide you through a series of questions about your income and tax situation to best suit your filing needs.
H&R Block At Home has also been recommended as one of the most accessible options available because it breaks down all necessary deductions for you to determine if the expense is relevant to your tax return. It also imports data about your previous year’s return information, which will only transfer over relevant items for your return calculation.
TaxACT has the option to import data from an external source, but it does not calculate your tax rate correctly if you choose this route. Based on reviews of the past few years, TaxACT has been known to provide incorrect calculations, which lead to higher than expected tax returns or less than what is owed in taxes.
Which one is the most affordable?
TurboTax, TaxACT, and H&R Block At Home are all well-known for having lower than average rates than other similar companies. Depending on which features you would like to use, you can expect to spend between $20 – $70 on these options. The only option that is not considered affordable is H&R Block At Home’s $59 fee for professional help.
TurboTax has an option called “TurboTax Absolute Zero,” which allows you to file your federal return with no payment required if you meet specific requirements. You can modify these qualifications by clicking on the link in the upper right-hand corner of their website.
TaxACT has been considered the most affordable option for individuals who do not have a complicated tax situation. It also has an option called “State Free,” which allows you to file your state return without paying any fees.
H&R Block At Home does not offer a free filing service because they include a fee for filing your state return, but they do have an option to file both returns together for $59.
Which one has the best support?
TurboTax, TaxACT, and H&R Block At Home offer support through phone, email, or live chat options. The only difference is that TurboTax provides more than just one email for help, and TaxACT only offers a contact option through their website.
TurboTax has been recommended as being best for phone and email support because they have separate customer representatives for each department you may need to speak with (Compared to H&R Block At Home, which assigns your representative based on your tax situation during the call).
TaxACT offers competitive phone and email support rates, but they have long wait times during peak season. You can also expect to wait longer if you call after 4 p.m. local time because the company does not offer phone support between 4 p.m. – 3 a.m., according to their website’s FAQs section.
Based on customer reviews, TurboTax is best when it comes to answering questions online through its website. TaxACT has also been known to provide reasonable responses through its Live Chat feature. H&R Block At Home offers the overall highest quality of support because they assign you one specific representative, for all your needs instead of splitting it between different departments within the company. So, when it comes to support, TurboTax software is best for a rental property.
Which one provides a better user interface?
TurboTax has a clean and easy-to-use interface that is similar to most websites these days. Its intuitive design allows you to easily navigate through all of your options without feeling overwhelmed or frustrated. The only difficulty with the user interface is finding where you can input information for specific categories such as education tax credits, moving expenses, and self-employment.
Which one has the best customer reviews?
TurboTax has been recommended by 77 percent of all their customers, which is a good sign that you will have a quality experience. However, their prices may be higher than some of the other options.
Which one has the best customer service?
TurboTax offers more than just one email for help, and TaxACT only offers a contact option through their website. TurboTax has been recommended as being best for handling issues related to uploading documents.
TaxACT has been known to have a large number of long hold times.
H&R Block At Home offers the overall highest quality of support because they assign you one specific representative, for all your needs instead of splitting it between different departments within the company.
Which one uses their website more efficiently?
TurboTax has more of a modern feel with a clean design and simple colors. This makes it easy to navigate through the different options quickly without feeling overwhelmed or frustrated. They also highlight any relevant information throughout their pages instead of burying essential details within the text on the screen.
Which one is best for entering rental income?
TurboTax has a section dedicated specifically to rental properties (They don’t break it down into farm, royalty, etc.) and another section to enter rental income. While this comes in helpful for those with a high amount of income from their property, it can also become overwhelming.
Which one is best for entering capital gains and losses?
TaxACT makes users type in the amount they are changing manually, which can be very tedious if they frequently change numbers. In addition, even though it has a section dedicated specifically to capital gains and losses, the software does not keep track of the information entered to notify users when another entry is necessary.
TurboTax has been recommended as best for handling issues related to uploading documents, and TaxACT has been known to have many long hold times. However, H&R Block At Home offers the overall highest quality of support because they assign you one specific representative, for all your needs instead of splitting it between different departments within the company.
It’s not always easy to know which tax software is best for a rental property. Thankfully, we have the knowledge and experience in this field, so you don’t have to worry about it! Join our Facebook Group and be in the thick of constant ideas and inspiration from seasoned landlords passionate about what they do. We love hearing stories from people just like you who want to share their tips on improving their real estate business with us – all while having fun doing it!