How to File Income Taxes on Rental Homes

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Rent you receive from property you own is generally considered income and must be reported on both your federal and state income tax returns. However, expenses associated with maintaining the rental property are usually deductible, so you are only paying income tax on any profit you made from renting the property during the year. It is important to keep accurate and detailed records of your expenses so that it will be easy to calculate them at tax time, and you will be prepared in case of an audit.

  • Download and print a copy of IRS Form 1040, Schedule E. This is the form where you list all of the details of your total rent income and expenses.

  • Total up all of the rent you received over the year. Rents paid in advance and property or services in lieu of rent must be included, but security deposits should not be included in this amount. Enter this amount on the line indicated on Schedule E.

  • Total all of your expenses in maintaining the rental property during the year. Note that you can also claim depreciation of the property as another deduction if you file Form 4562. Enter this amount on the line indicated on Schedule E.

  • Subtract the total expenses from the total rent income to calculate your net income from the rental property. This is the final figure that goes on your 1040.

  • Transfer the net rental income amount to the appropriate line of Form 1040, and attach a copy of Schedule E to your completed tax return.

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