How to Calculate Net Rental Income

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Net rental income

Net rental income equals rental revenue minus rental expenses. When filing taxes, the Internal Revenue Service requires taxpayers to calculate net rental income on Form 1040 Schedule E. Computing rental income is important because rental expenses are allowed to offset rental income, so the IRS does not tax all of the rental income.

Instructions

    • 1

      Calculate the rental income for the period. Rent income is the amount collectible from each apartment being rented. For example, a person has four apartments and receives $4,000 from the apartments for January.

    • 2

      Calculate the rental expenses for the period. Rental expenses include any cash outflow to support the renting of the apartments, such as advertising and repairs. Form 1040 Schedule E provides a more comprehensive list of expenses. In the example, the person had $1,000 of expenses connected with maintaining his apartments for January.

    • 3

      Subtract rental expenses from rental income to determine net rental income. In the example, $4,000 minus $1,000 equals net rental income of $3,000.

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