If you own rental property, you may have heard that you’re not required to file Form 1099-NEC for contractors, such as plumbers or handymen. While that’s often true, choosing not to file could be costing you valuable landlord tax deductions.
Filing 1099s helps position your rental activity as a trade or business—a critical step if you want to claim the 20 percent Section 199A deduction or deduct repairs under the de minimis safe harbor.
Here’s how it works:
- Section 199A allows a 20 percent deduction on net rental income—but only if your rental qualifies as a business. Filing 1099s supports that claim, and it can be worthwhile. For example, $20,000 in rental income could mean $4,000 in deductions—saving you nearly $1,000 at a 24 percent tax rate.
- The de minimis safe harbor allows you to deduct repair and maintenance costs (up to $2,500 per item) immediately rather than depreciating them over several years. But again, this applies only if the tax code treats your rental activity as a business.
The IRS has made clear that failing to file 1099s may weaken your ability to claim these benefits. Fortunately, this is something you can address proactively.
We can help you evaluate your rentals, determine whether you qualify, and handle the necessary filings and documentation. It’s a small step that could lead to decent savings.
How We Can Help
Sterling Tax and Accounting is here to help your business with tax planning! Our comprehensive approach to tax planning helps reduce your overall tax liability and keep more money in your pocket. If all your accountant does is file your taxes, chances are they are making you pay more than your fair share of taxes.
Learn how to proactively save on taxes by scheduling a call with our tax planning specialists.
Our tax planning, accounting & business services help you stay on track. Sterling Tax & Accounting will work with you to optimize your business and minimize your taxes. We will work to provide you and your business with the tools and resources you need to build a solid tax and business foundation. We’re a trusted CPA Firm in Sarasota, Florida. We serve clients all over the US, and proactively work to minimize their taxes.
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