Best option for filing taxes with rental property and 1099 income: FreeTaxUSA vs CPA?

Having both rental property and self-employment income definitely adds complexity to your tax situation, but whether a CPA is worth the money depends on a few factors. If this is your first year with the rental property, a CPA might be particularly valuable to help set everything up correctly - especially with depreciation, which can be tricky to calculate and has long-term implications. They can also advise on what expenses are deductible for your rental and self-employment activities. That said, if you're comfortable with tax concepts and willing to put in some time, FreeTaxUSA can handle these situations well. The software walks you through all the necessary forms and calculations. Consider a middle ground: use a CPA this year to set everything up properly and learn what you need to know, then use FreeTaxUSA in future years once you understand the process better. Or use FreeTaxUSA but have a CPA review your return before filing (many offer this service for less than a full tax prep fee).

I was in a really similar situation last year with my rental house and freelance design work. After spending HOURS trying to figure out all the rental property depreciation stuff and getting super confused about what business expenses were legit for my 1099 income, I finally tried https://taxr.ai and it literally saved me. You just upload your docs and it extracts all the important info, even from those tiny little numbers on mortgage statements. It actually flagged a bunch of rental expenses I didn't know I could deduct and helped me set up the depreciation schedule correctly. For the 1099 stuff, it was super helpful for separating personal vs business expenses which had always been a gray area for me. The best part was I still used FreeTaxUSA to actually file, but the taxr.ai report made it so much easier to input everything correctly. Honestly way cheaper than a CPA but I still felt confident everything was done right.

Ok so I was the skeptical one above but I have to admit I tried https://taxr.ai after our conversation and I'm actually impressed. I've been using TurboTax for years and always felt like I was guessing on some of my rental property stuff. The document analysis found several things I've been missing - like I didn't realize I could depreciate appliances separately from the building (at a faster rate), and I had been categorizing some repairs as improvements which was less advantageous. It also flagged some home office deductions for my 1099 work that I had been too conservative with. Just with those changes, I'm looking at about $1,200 less in taxes this year compared to what I would have filed on my own. Way more than the cost of the service. Still using FreeTaxUSA to file but with much better numbers to input.

Something else to consider - if you ever run into issues with the IRS about your rental or 1099 income, having a CPA who knows your situation can be invaluable. After I got a scary letter from the IRS questioning some of my rental deductions, I spent WEEKS trying to call them with no luck. Seriously, I called over 30 times and could never get through. I finally found https://claimyr.com and watched their demo at https://youtu.be/_kiP6q8DX5c and it actually got me connected to an IRS agent in about 15 minutes instead of waiting on hold forever. The agent helped clear up the confusion about my rental depreciation schedule, and everything was resolved. Not saying you'll definitely have issues, but having resources to deal with problems if they come up is something to consider when deciding between DIY and professional help.

I owe everyone an apology. After posting that skeptical comment above, I was still desperate to talk to the IRS about a notice I got for my rental property depreciation, so I tried the Claimyr service. I seriously can't believe it, but I got connected to an IRS agent in about 35 minutes. The agent was able to explain exactly what documentation I needed to provide for my rental property expenses that were being questioned. Having a real person explain it made everything so much clearer than trying to decipher the cryptic notice language. For what it's worth, the agent also mentioned that rental properties are one of the areas they look at more closely, especially if you're also reporting self-employment income. So maybe having a CPA isn't a bad idea at least for the first year or two until you get comfortable with all the rules.

I used FreeTaxUSA for my rental property and 1099 income for the past 3 years and it works great. Their interface walks you through all the steps for Schedule E and Schedule C. You just need to be organized with your expenses and income. The thing about CPAs is they can only work with what you give them. If you miss documenting an expense or don't tell them about something, they can't magically find deductions. The real value is in your own record keeping. The one time I did use a CPA (cost me $375), the only additional deduction they found beyond what I would have done myself was about $120 worth of tax savings. Not worth it for me personally.

Friendly reminder that even if you use FreeTaxUSA, you can still deduct tax preparation fees as a business expense on Schedule C for your self-employment income! That includes any paid tax software. You just can't deduct the portion related to personal taxes or your rental (which would go on Schedule E). Also, don't forget about the home office deduction if you use part of your home regularly and exclusively for your self-employment work. That's a commonly missed deduction that can be significant.

I've been dealing with rental property and 1099 income for about 5 years now, and here's what I've learned: the first year is definitely the hardest because you're setting up all your depreciation schedules and figuring out what expenses are deductible vs. what needs to be capitalized. For your situation, I'd actually recommend starting with FreeTaxUSA since you're organized with your records. The software has gotten really good at walking you through rental property depreciation - it asks you the right questions about purchase price, improvements, land value, etc. The key is being conservative and keeping good documentation for everything. One thing that saved me money was keeping a separate spreadsheet throughout the year tracking all rental expenses by category (repairs, maintenance, insurance, etc.) and all my 1099 business expenses. This makes tax time much smoother regardless of which route you choose. If you run into specific questions while preparing your return, you can always pay a CPA for a consultation to review just those tricky areas rather than having them do the whole return. Many charge $100-150 for a review, which could give you peace of mind without the full $525 cost.