If you own or maintain rental property in Denver, it is important to learn the answer to this question, “What is the tax rate on rental income”. Understanding your financial obligations as a landlord can make things much easier.

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Rental property business is both challenging and rewarding, all in one. There are several elements to property management in Denver. These range from screening tenants, to performing maintenance on the property, to upgrading and enhancing the property.

However, there is one element that is often overlooked until it is absolutely necessary to contend with and that is the tax-based implications associated with owning and maintaining a rental property business. In this brief guide, you will learn about tax rates on rental property and be provided with other tax-related information that is relevant to your property management business.

I want to be a successful landlord. I like real estate….”Two Chainz

Do I Pay Taxes on Rental Income?

Yes, if you obtain monies from rentals, that income is considered to be taxable; however, not all of the monies that you obtain is considered to be taxable. Does that sound confusing? It does not have to be. Simply put, you may subtract any and all expenses associated with preparing your property and maintaining that property for tenants.

In order to report the income and expenses, you will need to complete a Schedule E, which is “Supplemental Income and Loss”, and then file it with a completed Form 1040.

What is the Tax Rate on Rental Income?

In most instances, the tax rate on rental income is based on federal standards, which is 20% or less. However, if you are renting a property in an area that charges the Medicare surtax, you will be responsible for paying an additional 3.8%.

Therefore, if you rent out a home in an area in Denver where you must pay a tax rate of 18% and the Medicare surtax, your total tax rate responsibility on your rental income would be a total of 21.8%.

Additionally, you must be aware of the fact that a part of your income gain may be subjected to a maximum rate from the federal government of 25%. In order to ensure that you are paying the appropriate tax rate on your rental property, you should opt to have a professional property management team assist you in filing.

Do I Pay Taxes on Security Deposits?

When you get a security deposit, it is not considered “income”; therefore, it is not taxable. However, if the last month’s rent is included in the deposit, that is considered “income” and is taxed.

If your tenant vacates the property and does not qualify for the deposit to be returned, it is then considered to be taxable income on your end.

You may deduct any expenses taken from the deposit, though, and that is not taxable.

Do You Find This Challenging?

It is not at all uncommon for landlords to wonder, “what is the tax rate on rental income?” In fact, this is one of the most common questions asked. Tax implications may prove to be challenging, but, the reward of owning a rental property business is immense.

If you need help getting your rental business up and running in the Denver or surrounding areas, let us help!

We offer professional property management assistance that will leave you reaping the highest possible financial rewards. Learn why you should choose Pioneer Property Management for your rental management in Denver.


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