Tax Tip 9 Rental Income and Losses
tax tips for tax year 2008
Rental Income and Losses
You must include in income all amounts you receive as rent. Rental income and expenses are entered on Schedule E and net rental income or loss is then carried to the income section of Form 1040.
Most individuals count their rental income as income when it is actually or constructively received, and deduct their expenses as they are paid. Some examples of expenses that may be deducted from your total rental income are depreciation, repairs, and operating expenses. You can recover some or all of your original investment in the rental property (including furnishings) and the cost of capital improvements through depreciation using Form 4562.
Rental losses are subject to various limits under the passive activity and at-risk rules, and excess or non-deductible losses may be carried forward to the following tax year. See Form 8582 and Instructions.
Note that the sale of rental property does not qualify for the preferential tax treatment given to the sale of a main home.