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IRS.gov Website
Rev. date: 2/14/2017


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 they actually or constructively receive it, and deduct their expenses when they pay them. Rental income includes:


Rental Expenses

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Examples of expenses that you may deduct from your total rental income include:
If you're a cash basis taxpayer, you can't deduct uncollected rents as an expense because you haven't 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 don't use the rental property as a home and you're 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 Publication 925, Passive Activity and At-Risk Rules, and 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, refer to Publication 527 and Is My Residential Rental Income Taxable and/or Are My Expenses Deductible?