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

Income — Rental and Schedules K-1

Depreciation

Discussing Depreciation

Taxpayer Interview and Tax Law Application

As you use the intake and interview sheet with taxpayers, ask questions to determine if they have any rental income and expenses. Use the Interview Tips to help obtain additional information, as shown in this sample interview. Press the Play Audio button to hear the audio.

Sample Interview
Volunteer Says…   Tony Responds…
 
I see you were stationed overseas last year from March through December. Did you rent out your home during that time? Yes. From February 1 through the end of the year. Actually, the tenant was there for thirteen months—he just moved out.
 
We only need to deal with last year. Now, during January of last year you were the only one living in the house? Yes, that's right. How does all that affect my taxes?
 
For January, we'll report a twelfth of your mortgage interest and property taxes as itemized deductions on Schedule A. For February through December, we'll report your mortgage interest, property taxes, the cost of maintenance and repairs, and other expenses on Schedule E. OK
 
Now, how much did you receive in rent and other payments from February through December? There was rent of $1,200 each month and the last month's cleaning deposit.
 
I have Form 1098 for your mortgage interest and the invoice for your property taxes. I'll need the amount of your homeowners insurance for the year. Did you have any other expenses related to renting, such as repairs or improvements? Yes, just before I left the country, I spent $1,000 having the place painted and I installed a new refrigerator.
 
We'll report the paint job on Schedule E as an expense. We'll also work out the depreciation on both the house and the refrigerator.