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

Income — Rental and Schedules K-1

Special Allocations

Topic Summary

This topic discussed when to report rental income and deduct rental expenses for property a taxpayer used for personal purposes.

If the property was used as a rental for the entire year, the income and expenses can be reported on Schedule E.

If the property was used partially as a rental and partially as a residence, some expenses may need to be allocated as rental use or personal use; these expenses are reported separately. The most common methods used are based on the number of rooms in the dwelling or on the total area of the dwelling.

Taxpayers who do not use a dwelling unit as a home (for personal purposes) should include all the rent in their income and deduct all the rental expenses.

Taxpayers who do use a dwelling unit as a home and rent it out 15 days or more during the year may not be able to deduct rental expenses that exceed rental income.

Taxpayers who do use a dwelling unit as a home and rent it out fewer than 15 days during the year should not report any of the income or deduct any of the rental expenses.