We inherited real estate from our parents estate. How exactly is the rental income reported and how will we be taxed?

ANSWER

The BIDaWIZ Team's Answer:

The income generated from the real estate held in an estate is distributed to the beneficiaries via the Schedule K-1 of their Form 1041. The rental income flows to each individual beneficiary's Schedule E (line 33), which flows to their Form 1040. Rental income is taxed at federal ordinary income tax rate as well as based on your state tax rate.

References: IRC Section 61(a)(15) & IRS Publication 559 State: New York