Rental Income Guide.pdf

Must be reported on tax return, including advance rents and security deposits.
Rental Expenses: Deductible expenses include mortgage interest, property taxes, insurance, maintenance, and utilities.
Depreciation: Rental property can be depreciated over 27.5 years using the Modified Accelerated Cost Recovery System (MACRS).
Special Depreciation Allowance: Bonus depreciation deduction available, but phased out in 2024.
Reporting Rental Income and Expenses: Use Form 1040, Schedule E, and Form 8582 to report rental income, expenses, and losses.
Limits on Rental Losses: Passive activity loss limits apply, and excess losses may be carried forward.
Personal Use of Dwelling Unit: Expenses must be divided between personal and rental use, and only rental expenses are deductible.
Special Situations: Rules apply for condominiums, cooperatives, property changed to rental use, and not-for-profit rental activities.
Tax Help: Available from the IRS through various channels, including IRS.gov and the IRS phone number.

Important Reminders

Standard Mileage Rate: Increased to 67 cents per mile for 2024.
Net Investment Income Tax (NIIT): 3.8% tax on net investment income, including rental income.
Excess Business Loss Limitation: Applies to losses reported on Schedule E, and excess losses are carried forward.
Form 461: Used to determine excess business loss, which is included as income on Schedule 1.