Claiming rental income on a personal tax return can be an intimidating thing to do. It is a challenge, but with the proper understanding of the process and what is and isn't deductible and/or allowed, it doesn't have to be. A thorough examination of the Schedule E will help answer a lot of the questions individuals have about home rent income.
Things You'll Need
- Form Schedule E from the IRS website
- A spreadsheet with all rent payments made, all expenses spent
- A count of the number of days you stayed in or used the home being rented
Declaring Home Rent Income
Create a spreadsheet of income versus expenses. Usually rental income is a regular monthly income being paid by tenants to home owners. Once in a while, the rental home will be unoccupied, and no rent is being paid. Regardless of whether it's a full year or not, you need a spreadsheet detailing the total income being made and the total expenses being paid to arrive at the gain or loss on the rental.
Print the Schedule E and examine the form carefully. The layout of the form uses three columns, A, B, and C. Each column represents one rental property. Each property will have separate income and expenses. Box 1 lists the addresses and locations of each of the properties involved, and Box 2 helps determine the usage of the rental home by the owners.
Determine the usage limitations for the rental home. If you have a rental home that is standing empty of tenants, it is important to remember the limitations of using your rental home. If the owner uses the home for more than 10 percent of the days the home has been rented in that tax year or for more than 14 days, the deductible expenses in the renting of the home will be limited. It is better to leave the home empty than run the risk of losing these deductions.
Calculate the loss or gain. Boxes 3 through 18 calculate the deductions of the expenses necessary to rent a home. Box 20 is a calculation of the depreciation that is allowable on the rental home and is deducted from the rental income. Box 23 is the calculation of the income minus the expenses and represents either a loss or a gain.
Transfer the bottom line amount, whether a gain or a loss, in box 26 to line 17 on the 1040. This will represent your obligation from the rental income made. It helps to have a competent tax professional work out the difficult areas in your return.
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