The Internal Revenue Service has guidelines that define rental property. Two of the most common types of rental property include vacation homes and permanent rentals. Rental income is reported on your annual tax return, but money-saving deductions are associated with the expenses involved in renting a property.
One of the IRS definitions of rental property is a property that permanently serves as a rental. A permanent rental is never used as living quarters for the owner or any dependents he claims on his federal tax return. A permanent rental is a house, duplex or apartment complex that serves full time as a rental and is not used by a nonprofit organization. An owner is eligible to deduct expenses related to the rental on his income taxes, but he must also report all income that is associated with the permanent rental property.
The IRS defines another type of rental property as a vacation home. A vacation home is considered a rental if it is rented out at any time during the course of the year. For most vacation home owners, time spent at the vacation home is minimal compared to time spent at the primary home. A homeowner can only deduct the portion of expenses associated with the vacation home that is incurred when renters live in the vacation home. Most tax specialists use prorated amounts to determine deductible expenses. If the vacation home is not rented out at any time during the year or the inhabitants are allowed to stay for free, the vacation home is not a rental property.
According to IRS definitions for rental property, a nonprofit rental is a house, duplex or apartment that is rented with no profit going to the owner. As a result, all eligible expenses associated with the property are deductible. A nonprofit rental is a property that is not inhabited by the owner during any portion of the year.
Partial Property Rental
A partial property rental is one in which part of the property is rented, and the other part is inhabited by the owner. This is especially common with duplexes and apartment complexes in which the owner lives in one of the units. Another partial property rental is one in which the owner rents part of his house, like the basement or an apartment room, to another person. According to the IRS, a portion of the house is a rental, but the majority of the house is the owner's primary residence. Only the portion of expenses associated with the rental is deductible, and all rental income is reported.
- Photo Credit house image by hans slegers from Fotolia.com
How to Manage Rental Property
If you plan to manage rental property, you'll need organizational and management skills, along with a good working knowledge about real estate...
What Does NNN Mean on Rental Property?
NNN on a lease is an acronym for triple net lease. A triple net lease is a rental contract on commercial property...
IRS Rules for Owner Occupancy of Rental Properties
IRS Rules for Owner Occupancy of Rental Properties. When you have a rental property that you also use as a home, different...
How to Renovate Rental Property for Higher Profit
Renovating a rental property can be one of the most important components of increasing potential rental income for landlords. There are several...
Tax Deductions for Non-Profits
Tax Deductions for Non-Profits. Non-profit companies operate with a defined purpose and use surplus revenues to carry out that purpose as opposed...
IRS Definition of Fair Market Value
As defined by the IRS, "fair market value (FMV) is the price for which you could sell your property to a willing...
Definition of Deeded Property
A deeded property is any type of property that is owned outright in which the deed is recorded in the property's county....
How to Meet the IRS Definition of a Dependent
To meet the IRS definition of a dependent, you must materially support the person the children or relative you are claiming as...
Property Lease Agreements for Non-Profits
Property Lease Agreements for Non-Profits. Property lease agreements with non-profits can be very simple, or very tricky, depending on the particular agreement...
IRS Rules for Deductibility for Personal Use of Rental Properties
The IRS allows certain deductions for rental property income and expenses. Special rules apply if the rental property is also used for...