When you receive your first 1099-K, you may notice that it includes things that are not rental income for you, such as convenience fees paid by tenants.
No worries! This is what the IRS mandates, but the gross amount is NOT your reported income.
Key Takeaways
The IRS requires that 1099-Ks show gross income
The 1099-K total is NOT your reported income. It is to help you figure out what to report on your tax return.
You can DEDUCT fees, credits, and refunds (such as the convenience fees) from the gross amount when reporting your income on your tax return.
IRS Mandate
The key takeaways above are from the IRS outline in https://www.irs.gov/pub/taxpros/fs-2024-03.pdf as follows:
When filing:
Your business can deduct the full cost of merchant fees (convenience fees) on a Schedule C.
These tax deductions do not directly affect your company’s total tax bill. Instead, this tax deduction is subtracted from your gross earnings, which allows you to pay taxes on less than the gross processed amount. This is referenced in this help center article.