Tax Law (Questions About Taxes)/rental income


QUESTION: hi john, i setup a LLC to own rental properties i bought.  llc will receive about $17K in net income after expenses this year. i understand that as the owner of the llc this income will pass to me and need to declare it in my personal income tax.  since this is passive income, do i need to pay self employment tax? what will be the tax rate? i heard passive income is tax at 15%

can you explain ?


Thanks for your question.

Real estate rental income is not subject to self-employment taxes.

The income is passive, but it is taxed at ordinary income rates. You are thinking about the capital gain rate, probably. The ordinary income rate varies depending on your total taxable income and can vary from 10 to 39.6%.

Hope this helps.

John Stancil, CPA

---------- FOLLOW-UP ----------

QUESTION: Thanks john. Where in my personal income tax should I declare this income? What form or line # in 1040?

Also, since I set up an llc ,do I have to file quarter taxes on this passive income or do I just file corporate taxes at year end only


The rental gain or loss would be reflected on page 2 of Schedule E.

You don't have a corporation so you don't pay any corporate taxes. If your personal withholding is insufficient to cover your tax liability, you should make quarterly payments.

Your questions indicate a high degree of lack of knowledge of tax law. I would strongly suggest you employ the services of a CPA whovspecializes in taxes or an Enrolled Agent to advise you and prepare your taxes.

Hope this helps.

John Stancil, CPA  

Tax Law (Questions About Taxes)

All Answers

Answers by Expert:

Ask Experts


John Stancil, CPA


I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I am Professor Emeritus at Florida Southern College. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a CPA practice, specializing in tax, for over 35 years. I am a member of the National Association of Tax Professionals, The Florida Insititute of CPA's, The NCPE Fellowship. In addition I am a Certified Mentor for SCORE. Visit my website at I also offer seminars and consultations to churches and clergy on their tax issues at Also visit my blog, I am listed on Tax Connections at Prepare and file your own taxes at


I hold a doctorate in Accounting, and am a CPA. My certifications of CIA, CFM, and CMA are inactive. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I have operated a CPA firm for over 37 years and have taught accounting and tax at the college level for over 35 years.

FICPA, NATP, NCPE Fellowship, Lakeland Business Leaders

The CPA Journal, Florida CPA Today, Green Consumer, Green Business, Global Sustainability as a Business Imperative, Palmetto Review, NATP TaxPro Quarterly, Mustang Journal of Finance and Accounting.

DBA University of Memphis MBA University of Georgia BS in Accounting Mars Hill University

©2016 All rights reserved.