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

Income — Rental and Schedules K-1

Special Allocations

Rental vs. Personal Use

Expenses that apply to just the rental part of a property should be reported in full on Schedule E, because they are direct business expenses. For example, the cost of installing a second phone line strictly for a tenant's use is deductible as a rental expense.

Frequently Asked Questions

Question: Is the cost of the first phone line in a partially rented property deductible if tenants use it?

Answer: No, you cannot deduct any part of the cost of the first phone line in a partially rented property, even if tenants use it.

Expenses that benefit the entire property (indirect expenses) must be divided between rental use and personal use, and also reported on Schedule E. The taxpayer may use any reasonable method to allocate the expenses. The most common methods are based on the number of rooms in the dwelling or on the total area of the dwelling.