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Rev. date: 11/27/2013

Rental Income and Expenses

Tax Topic 414
Generally, cash or the fair market value of property you receive for the use of real estate or personal property is taxable to you as rental income. You can generally deduct expenses of renting property from your rental income. Income and expenses related to real estate rentals are usually reported on Form 1040 (Schedule E). If you provide substantial services that are primarily for your tenant's convenience, you report your income and expenses on Form 1040 (Schedule C). Income and expenses related to personal property rentals are reported on Form 1040 (Schedule C) or Form 1040 (Schedule C-EZ) if you are in the business of renting personal property and directly on Form 1040 if you are not.
Most individuals operate on a cash basis, which means they count their rental income as income when it is actually or constructively received, and deduct their expenses as they are paid. Some specific types of income are:
Some examples of expenses that may be deducted from your total rental income are:Repair costs, such as materials, are usually deductible. For a discussion of the difference between repairs and improvements, and information on the depreciation of most rental property, refer to Publication 527, Residential Rental Property (Including Rental of Vacation Homes). For additional information on depreciation, refer to Publication 946, How To Depreciate Property.
There are special rules relating to the rental of real property that you also use as your main home or your vacation home. For information on income from these rentals, or from renting at an amount less than the fair market value, refer to Tax Topic 415.
If you do not use the rental property as a home and you are renting to make a profit, your deductible rental expenses can be more than your gross rental income, subject to certain limits. For information on these limitations, refer to Tax Topic 425.
For more information on rental income and expenses, including passive activity loss limits, refer to Publication 527 and Publication 925, Passive Activity and At-Risk Rules.