Must Investment Property Owners File Taxes?

Dear Tax Talk,

My husband and I are in our mid-70s and have a rental property that is mostly a money pit. We have not paid any taxes for the past several years, even though we both draw Social Security, have a small pension and about $400 in interest and dividend income. The rental loss and standard deductions always leave us with no taxes to pay. Do we still need to file taxes every year?

-Julie

Dear Julie,

Whether or not you need to file every year depends on your age, your filing status and your gross income.

Now let's take a look at your particular situation. For the tax year 2013, if you are older than 65 and your filing status is married filing jointly and your "gross income" is more than $22,400, then you are required to file a return. Your "gross income" is what you will need to calculate at this point.

Gross income is going to include all of your income that is not exempt from tax. This will include your interest, dividends, gross rent received before you deduct your rental expenses and may also include some of your Social Security benefits if any of those are taxable to you.

The end result may be that even though you do not owe any taxes, you might still be required to go through the process of filing a tax return. You didn't tell me the amount of gross rents received, but that needs to be factored in when you are doing your calculation.

Thanks for this great question and all the best to you.

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