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IRS.gov Website
Rev. date: 11/18/2015


Rental Income and Expenses

Tax Topic 414
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Cash or the fair market value of property or services you receive for the use of real estate or personal property is taxable to you as rental income. In general, you can deduct expenses of renting property from your rental income.


Real Estate Rentals

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Personal Property Rentals

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Rental Income

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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 when they are paid. Rental income includes:


Rental Expenses

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Examples of expenses that you may deduct from your total rental income include:
If you are a cash basis taxpayer, you cannot deduct uncollected rents as an expense because you have not included those rents in income. Repair costs, such as materials, are usually deductible. For information about repairs and improvements, and 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.


Personal Use

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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.


Limitations

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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.


Net Investment Income Tax

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If you have a rental profit, you may be subject to the Net Investment Income Tax (NIIT). For more information, refer to Tax Topic 559.


Additional Information

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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.