When you have real estate that generates rental income for you, you must report your rental income and rental expenses on Schedule F of your personal tax return.
However, there are certain limitations that can apply if you use the real estate for personal and rental purposes. The IRS considers real estate used personally if you use the property for yourself for the greater of 14 days or 10% of the total days you rent out the property. If you use the property for personal purposes as well, you must then divide the property’s total expenses between the rental portion and the personal use portion.
In addition to having to divide the expenses, you will not be able to deduct any rental expenses in excess of the rental income for the property.
Some examples of deductions that can be taken for rental property are mortgage interest, real estate taxes, casualty losses, utilities, maintenance, and depreciation. If you or someone you know is dealing with tax issues, we can be reached at Hoorfarlaw.com or 816-524-4949.