Reporting Rental Income & Expenses
Report rental income and expenses on Form 1040 or Form 1040-SR, using Schedule E (Form 1040).
Deductible expenses may include mortgage interest, property taxes, insurance, maintenance, utilities, casualty losses, and depreciation.
If you rent for profit and do not use the property as a residence, rental losses may be deductible, but are subject to the "at-risk" and passive activity loss rules.
Personal Use of Rental Property
If you use a rental property as a residence, your deductible rental expenses may be limited. A dwelling unit is considered a residence if your personal use exceeds:
14 days, or
10% of the total days rented at fair market value.
💡 Example: If you live in your main home for 11 months and use a vacation home for 30 days, the vacation home is also considered a residence—unless you rent it for more than 300 days at fair market value.
A personal use day includes:
Use by you or a co-owner, unless rented at fair value under a shared equity financing agreement.
Use by a family member, unless they pay fair rent and use it as their main home.
Use under an agreement that allows you to use another property.
Rental at less than fair market value.
Minimal Rental Use Exception
If you rent a dwelling for fewer than 15 days per year, you don’t report rental income or deduct rental expenses.
Dividing Expenses Between Rental & Personal Use
If a property is used for both rental and personal purposes, expenses must be allocated based on the number of days used for each purpose.
You cannot deduct rental expenses beyond gross rental income, but you may carry forward some rental expenses to future years.
If you itemize deductions, you may still deduct personal portions of mortgage interest, property taxes, and casualty losses (for federally declared disasters) on Schedule A (Form 1040).
Net Investment Income Tax (NIIT)
Rental profits may be subject to the 3.8% Net Investment Income Tax (NIIT)