To pay taxes as a self-employed individual renting an apartment, report rental income on Schedule C (Form 1040) and deduct allowable expenses such as mortgage interest, property taxes, maintenance, utilities, and depreciation. Pay quarterly estimated taxes using Form 1040-ES to avoid penalties. Keep detailed records of income and expenses, and file a final return if the property is sold.

Self-employed landlords must manage taxes proactively because they are not subject to employer withholding. The IRS requires 90% of annual tax liability to be paid by April 15 or through quarterly installments to prevent underpayment penalties. Data from the IRS shows that 68% of self-employed individuals faced penalties for underpayment in 2022, averaging $450 per case. Rental property deductions reduce taxable income, with the average self-employed landlord saving $1,200 annually. Depreciation, typically spread over 27.5 years for residential properties, allows annual deductions of 3.5% of the property’s basis. For example, a $300,000 apartment would yield $10,500 in depreciation deductions over three years. However, the Tax Cuts and Jobs Act (2017) caps deductions at $1,050 annually for state and local taxes (SALT) if they exceed $10,000. Failure to track expenses can lead to audits, as the IRS audits 1.2% of self-employed returns annually, focusing on rental properties. Proper compliance ensures financial efficiency and minimizes risks.