Internal Revenue Service United States Department of the Treasury
Level Basic Advanced Military International

Income — Rental and Schedules K-1

Rental Income and Expenses

Rental Expenses

Mortgage Interest and Property Taxes

Taxpayers who live in their homes generally deduct their mortgage interest and property taxes on Schedule A, Itemized Deductions. When a taxpayer rents out a home, however, the interest and property taxes become rental expenses, along with the cost of certain other operating expenses. Taxpayers who do not use the rental home as their residence should:

  • Include the rent as income and
  • Deduct all of the rental expenses, even if they exceed income

Mortgage interest and property taxes are deductible as rental expenses. If the residence (or a portion of the residence) was used as rental property for any part of the year, the mortgage interest and real estate taxes might have to be divided between Schedule A and Schedule E. To do this:

  • Divide the total mortgage interest and property taxes by 12 months, and
  • Multiply by the number of months the home was used for each purpose
  • Generally, mortgage interest expense is fully deductible. However, a taxpayer with rental-related interest expenses other than mortgage interest should consult the IRS, a professional tax preparer, or a military legal assistance officer.
Calendar months from three consecutive months, each labeled "Home Rented."