Do Landlords Need to File Form 1099-NEC?

All landlords should file Form 1099-NEC to qualify for important tax benefits, including the 20% pass-through deduction.

By , J.D. · USC Gould School of Law

Businesses use IRS Form 1099-NEC to report payments over $600 made to independent contractors (before 2021, Form 1099-MISC was used). If you're a landlord, do you need to file IRS Form 1099-NEC to report payments you make to independent contractors, such as property managers and repair people?

Surprisingly, until recently, it has never been clear. Some people believed landlords didn't have to file 1099s at all, or needed to file them only if they wanted to qualify as real estate professionals for purposes of the passive loss rules. However, the IRS has recently made it clear that all landlords should file Form 1099-NEC.

The reason a landlord should file Form 1099-NEC is to help the rental activity qualify as a business for tax purposes, instead of an investment activity.

Why Landlords Should File Form 1099-NEC

By filing Form 1099-NEC, you can qualify for several important tax benefits that are only available to businesses. For example, you might qualify for:

  • the pass-through tax deduction, which can allow you to deduct up to 20% of your net rental income each year through 2025
  • the home office deduction
  • the deduction for the cost of attending rental-related seminars and conventions, and
  • the start-up expense deduction.

Additionally, when your rental activity qualifies as a business, you get the best possible tax treatment when you sell your rental property. Any gains are treated as capital gains, which are subject to a lower tax rate than ordinary income.

If you sell the property at a loss, you may deduct the loss without limit against all your income. Such losses are limited to $3,000 per year if your rental activity qualifies as an investment activity, not a business.

Filing 1099s Can Help a Rental Activity Qualify as a Business

One of the most significant changes the Tax Cuts and Jobs Act brought about was the creation of a brand new tax deduction for pass-through businesses. Pass-through business owners who qualify may deduct up to 20% of their net business income from their income taxes during 2018 through 2025. Landlords whose rental activity qualifies as a business may take the pass-through deduction.

One Factor the IRS Uses to Determine If a Rental Activity Qualifies as a Business

In its final regulations on the pass-through deduction, the IRS discusses how to determine if a rental activity qualifies as a business. It says that:

"taxpayers should consider the appropriateness of treating a rental activity as a trade or business…where the taxpayer does not comply with the information return filing requirements."

Information returns means filing Form 1099-NEC. In other words, it might not be appropriate to treat a rental activity as a business if a landlord doesn't file all required Forms 1099-NEC.

This is something the IRS has never said before. So now we know: Landlords should be filing 1099s. Failure to do so is a mark against you if the IRS ever questions whether your rental activity is a business.

When You Need to File Form 1099-NEC

Fortunately, filing Form 1099-NEC isn't an onerous requirement. The basic rule is that you must file a 1099-NEC form with the IRS if you pay an unincorporated independent contractor $600 or more during a year for rental-related services.

It makes no difference whether the sum was one payment for a single job or the total of many small payments for multiple jobs. This includes payments to property managers, repair people, and anyone else who performs services for your rental and is not your employee.

Calculating Payments Made to an Independent Contractor

In calculating whether the payments made to an independent contractor total $600 or more during a year, you must include payments you make for parts
 or materials the independent contractor used in performing the services. For example, if
 you hire an electrician to rewire a rental building and he charges you separately for the electrical wiring and other materials he installs, the cost must be included in the tally.

File 1099-NEC If You Pay by Cash, Check, or Direct deposit

You need to file Form 1099-NEC only if you pay an independent contractor $600 or more by cash, check, or direct deposit during the year.

If you pay an independent contractor by an online payment service like PayPal, credit card, or any other type of electronic payment, you don't need to file a Form 1099-NEC reporting the payment to the IRS. PayPal or the other payment service may have to report the payment; but this isn't your problem.

How to File Form 1099-NEC

All 1099-NEC forms reporting payments to independent contractors must be filed with the IRS by January 31. This is so whether they are filed electronically or on paper. The independent contractor must also be provided a copy no later than January 31. Most states use the same filing deadline.

Paper vs. E-Filing

If you file fewer than 250 1099-NEC forms during the year, you have the option of filing them on paper or e-filing them. (The IRS prefers that you file electronically.)

Filing Form 1099-NEC on paper. To file on paper, you must obtain original 1099-MISC forms from the IRS for filing. You can't photocopy this form because it contains several pressure-sensitive copies. To order the forms from the IRS, go to the IRS website. You can also use tax preparation or accounting software to prepare your 1099-NECs. Fillable PDFs of Copies B, C, 1, and 2 of Form 1099-NEC are available at You can complete these copies online for furnishing statements to recipients and for retaining in your own files; but you can't file them with the IRS. Alternatively, there are inexpensive online services that will complete and file the forms for you, such as,, and

All your 1099-NEC forms must be submitted together along with one copy of Form 1096, which is a transmittal form. You must obtain an original Form 1096 from the IRS; you cannot submit a photocopy.

Filing Form 1099-NEC electronically. If you want to file electronically, you have three options:

  • You can use accounting software such as QuickBooks or Buildium.
  • You can use online 1099-NEC filing service.
  • You can electronically file 1099-NEC forms directly with the IRS yourself by using its FIRE Production System. To do so, you must obtain a Transmitter Control Code (TCC) from the IRS by completing an IR Application for TCC, formerly Form 4419, Application for Filing Information Returns Electronically, and create a user ID, password, and ten-digit PIN for your For more details, visit the IRS Filing Information Returns Electronically (FIRE) webpage.

Talk to a Tax Pro

For information about tax deductions for landlords and tax tips in general, get Every Landlord's Tax Deduction Guide, by Stephen Fishman (Nolo).

If you need more help, talk to a tax professional, such as a certified public accountant or a tax attorney. A tax professional can prepare tax returns or provide tax information, guidance, or representation before the IRS.

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