Why Landlords Should File Form 1099-NEC

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 tax savings.

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.

If you want to discuss your rentals, please give us a call.