La Quinta, CA
(760) 895-3516

Tuesday, April 28, 2015

Reporting 1042-S Income on Rental Property

If you have rental income through a property manager in the United States, you should receive a form 1042-S each year around January to indicate to the IRS your gross rental income for the tax year. You will need to report this income if there is no income tax withheld in box 7.

If income tax has been withheld (typically at 30% of box 2, Gross income) you have the choice to either not file a return or to file a U.S. income tax return and report the income from form 1042-S Foreign person's U.S. sourced income subject to withholding.

How to Report 1042-S Income

  • For rental property, file 1040NR (if you qualify as non-resident) and use Schedule E
  • Usually, report box 2 Gross Income as Other Rental Income on line 3 of Schedule E
  • Fill out Schedule E as normal and use expenses to offset the gross income reported on the 1042-S
  • Remember that your building MUST be depreciated in the U.S.

Reporting income from rental properties can be tricky. The IRS audits non-residents claiming rental expenses quite frequently and it is imperative to have a U.S. Canadian income tax preparer working with you.

We can prepare your 1040NR to report 1042-S income from your U.S. real estate property rental. Our flat fee rate is only $250 if you have one rental property. 

Please call Borders Bookkeeping

(760) 895-3516