Becoming a landlord allows you to generate income through property rental, which comes with specific tax reporting requirements and opportunities for deductions.  In this guide, we will cover:

  • The transition from homeowner to landlord and its tax implications
  • Opportunities and responsibilities in reporting rental income
  • Benefits of tax planning in property rental

Reporting Rental Income

  • Understanding Rental Income, Expenses, and Deductions
    • What counts as rental income?
  • Schedule E: Reporting Rental Income and Expenses
    • How to use Schedule E on your tax return

Deductions for Landlords

  • Depreciation of Rental Property
    • Calculating and reporting depreciation
  • Repairs vs. Improvements
    • Distinguishing between deductible repairs and capital improvements
  • Common Deductible Expenses
    • Mortgage interest, property taxes, operating expenses, and insurance

Passive Activity Loss Limitations

  • Rules for Passive Activity Losses
    • When and how you can deduct rental losses
  • Exceptions for Real Estate Professionals
    • Criteria to qualify as a real estate professional for tax purposes

Renting Part of Your Home

  • Tax Considerations for Renting Out Part of a Primary Residence
    • Splitting expenses between personal and rental use

Special Rental Situations

  • Vacation Homes and Short-term Rentals
    • Different tax rules for short-term vs. long-term rentals
  • Leasing Property to a Business You Own
    • The self-rental rule and its implications

Tax Credits and Incentives

  • Residential Energy Efficient Property Credit
    • Eligibility for credits related to energy-saving improvements
  • Low-Income Housing Credit for Qualified Projects
    • Understanding eligibility and claiming the credit

Final Thoughts

  • End-of-year tax checklist for landlords
  • IRS forms and publications for rental property owners
  • The importance of accurate record-keeping and seeking professional advice

Detailed Bullet Points for the IRS Sections:

  • IRS References:
    1. Rental Income and Expenses: IRS Publication 527
    2. Schedule E (Supplemental Income and Loss): IRS Form Schedule E and instructions
    3. Depreciation: IRS Publication 946
    4. Passive Activity Losses: IRS Topic No. 425
    5. Residential Energy Credits: IRS Form 5695 and instructions
    6. Low-Income Housing Credit: IRS Form 8586 and instructions