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How to Pay Taxes on Your Rental Home

1.

Report all income from your rental property on Schedule E of your federal income tax return if the property was rented or available for rent throughout the year and you did not occupy the property at any time.

2.

Report all expenses for the rental property on Schedule E, including mortgage interest, property taxes, insurance, utilities, repairs, maintenance, management fees and depreciation.

3.

Subtract your total expenses from your total rental property income for the year.

4.

Realize that different IRS rules for reporting rental income and expenses apply to rental property that you occupied during the year, depending on the length of your occupancy.

5.

Consult a tax advisor to make sure you've properly reported all rental income and expenses on your tax return.

Tips and Warnings

  • Consult IRS Publication 527, Residential Rental Property, for complete details about reporting rental property income and expenses.
  • If your rental expenses are more than your rental income, be aware that your losses may be limited to $25,000 if your adjusted gross income is less than $100,000 for the tax year.
  • Be aware of different tax rules and regulations regarding second homes and vacation homes, especially if you occupied the property during the tax year.


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