How to han­dle in­come from rental prop­er­ties

Orlando Sentinel - - SUCCESS - By Pa­tri­cia Mertz Ess­wein

made on money,” says Ed Slott, a CPA and IRA ex­pert. In­ter­est and div­i­dends are also forms of pas­sive in­come.

Slott sug­gests a cou­ple of work­arounds: You could form your own prop­erty-man­age­ment com­pany as a cor­po­ra­tion or lim­ited-li­a­bil­ity com­pany and be­come its em­ployee. Then you could have a solo 401(k) (see www.irs.gov/ re­tire­ment-plans/one-par­tic­i­pant-401kplans).

Or, if you file a joint re­turn with your spouse and your spouse has earned in­come, you could each con­trib­ute to your own IRAs, as long as your spouse earns enough in­come to cover each of your con­tri­bu­tions. In that case, you can use your rental in­come to fund your spousal IRA.

For 2019 and 2020, your to­tal an­nual con­tri­bu­tions to your tra­di­tional and Roth IRAs can't ex­ceed $6,000 ($7,000 if you're age 50 or older) or your tax­able com­pen­sa­tion for the year, if your com­pen­sa­tion was less than that dol­lar limit.

If you and your spouse are fund­ing a reg­u­lar and spousal IRA, the com­bined con­tri­bu­tions can't ex­ceed the tax­able com­pen­sa­tion that you report on your joint re­turn.

Note that your Roth IRA con­tri­bu­tion might be lim­ited based on your fil­ing sta­tus and in­come. Sin­gles can make a full or par­tial con­tri­bu­tion to a Roth if their in­come is up to $137,000 in 2019 and $139,000 in 2020. Mar­ried joint fil­ers are el­i­gi­ble to make a full or par­tial con­tri­bu­tion to a Roth if their in­come is up to $203,000 for 2019 and $206,000 in 2020.

You can make a con­tri­bu­tion for 2019 up un­til April 15, 2020(see www.irs.gov/ forms-pubs/about-pub­li­ca­tion-590-a).

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