Investors are required to report the income earned from these investments on their individual tax returns and use Schedule K-1 as an attachment to do so. Schedule K-1 is a tax form that is issued by the Internal Revenue Service to individuals who have invested in real estate partnerships, limited liability companies or other entities that earn rental income. The Schedule K-1 helps to determine whether those capitalized costs are more or less than what they were when you purchased the property, which will determine whether there’s a gain or loss on the sale. When you sell it, that money has been “capitalized” (turned into income) via depreciation deductions (which reduce taxable income). When you bought the property, you invested some money in it. The purpose of Schedule K-1 is to help determine whether you have a gain or loss on the sale of an investment property or rental property. But did you know that when it comes to Schedule K-1, the form used to report your income from a pass-through entity such as an S corporation or partnership, there are some things you might not know about? If you own real estate, then you probably know that your property taxes are deductible as a real estate expense.
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