(Including Rental of Vacation Homes)
Tax-free exchange of rental property used for personal purposes.(p1)
You may qualify for a tax-free exchange (a like-kind or section 1031 exchange) of one piece of rental property you own for a similar piece of rental property, even if you have used the rental property for personal purposes. You must meet the following criteria.
- You own the rental property for at least 24 months before the exchange.
- During the 2 years before the exchange you rent the property to another person at a fair rental price for 14 days or more.
- Your personal use of the rental property during each of the two years before the exchange does not exceed the greater of 14 days or 10% of the number of days the property is rented.
For information on like-kind exchanges, see Publication 544, chapter 1.
Additional first-year depreciation for certain MACRS property.(p2)
You can elect a 50% special depreciation allowance (in addition to your regular MACRS depreciation deduction) if you placed in service during 2009 certain longer-lived and transportation property with a recovery period of 20 years or less. See Publication 946, chapter 3, for more information.taxmap/pubs/p527-000.htm#en_us_publink1000218945
Special depreciation allowance for taxpayers affected by May 4, 2007, Kansas storms.(p2)
You can take a special depreciation allowance for qualified property affected by May 4, 2007, Kansas storms. See Special Depreciation Allowance on page 12 of Publication 4492-A for more information.taxmap/pubs/p527-000.htm#en_us_publink1000218946
Change to special depreciation allowance for GO Zone.(p2)
For property placed in service after December 31, 2007, the deadline on construction of property eligible for the special depreciation allowance in the Gulf Opportunity Zone (GO Zone) has been waived.taxmap/pubs/p527-000.htm#en_us_publink1000218947
Special depreciation allowance for qualified property in federally declared disaster areas.(p2)
You can take a special depreciation allowance for qualified disaster assistance property placed in service after December 31, 2007, with respect to disasters declared after that date. See Publication 946 for more information.taxmap/pubs/p527-000.htm#en_us_publink1000218948
Expensing of qualified expenses allowed in federally declared disaster areas.(p2)
You can deduct, rather than capitalize, qualified disaster expenses paid or incurred after December 31, 2007, with respect to disasters declared after that date. See Publication 535 for more information.taxmap/pubs/p527-000.htm#en_us_publink1000218949
Deduction for qualified disaster clean-up costs in a Midwestern disaster area.(p2)
You can deduct, rather than capitalize, 50% of qualified disaster recovery assistance clean-up costs paid or incurred on or after the applicable disaster date, and before January 1, 2011. Refer to Publication 4492-B to see if your rental property is in a qualifying area and for details on the deduction.taxmap/pubs/p527-000.htm#en_us_publink1000218950
Photographs of missing children.(p2)
The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.
Do you own a second house that you rent out all the time? Do you own a vacation home that you rent out when you or your family isn't using it?
These are two common types of residential rental activities discussed in this publication. Generally, all rental income must be reported on your tax return, but there are differences in the expenses you are allowed to deduct and in the way the rental activity is reported on your return.
First, this publication will look at the rental-for-profit activity in which there is no personal use of the property. We will look at types of income and when each is reported, and at types of expenses and which are deductible.
Chapter 2 discusses depreciation as it applies to your rental real estate activity—what property can be depreciated and how to figure it.
Chapter 3 covers the actual reporting of your rental income and deductions, including casualties and thefts, limitations on losses, and claiming the correct amount of depreciation.
Special rental situations are grouped together in chapter 4. These include condominiums and cooperatives, property changed to rental use, renting only part of your property, and a not-for-profit rental activity.
Finally, in chapter 5, we will look at the rules for rental income and expenses when there is also personal use of the dwelling unit, such as a vacation home.taxmap/pubs/p527-000.htm#en_us_publink1000218951
For information on how to figure and report any gain or loss from the sale or other disposition of your rental property, see Publication 544, Sales and Other Dispositions of Assets.taxmap/pubs/p527-000.htm#en_us_publink1000218952
For information on how to figure and report any gain or loss from the sale or other disposition of your main home that you also used as rental property, see Publication 523, Selling Your Home.taxmap/pubs/p527-000.htm#en_us_publink1000218953
We welcome your comments about this publication and your suggestions for future editions.
You can write to us at the following address:
Internal Revenue Service
Individual Forms and Publications Branch
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to download forms and publications, call 1-800-829-3676, or write to the address below and receive a response within 10 days after your request is received.
Internal Revenue Service
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If you have a tax question, check the information available on www.irs.gov
or call 1-800-829-1040. We cannot answer tax questions sent to either of the above addresses.
You may want to see:
Publication 463 Travel, Entertainment, Gift, and Car Expenses 523 Selling Your Home 534 Depreciating Property Placed in Service Before 1987 535 Business Expenses 544 Sales and Other Dispositions of Assets 547 Casualties, Disasters, and Thefts 551 Basis of Assets 925 Passive Activity and At-Risk Rules 946 How To Depreciate Property 4492-A Information for Taxpayers Affected by the May 7, 2007, Kansas Storms and Tornadoes 4492-B Information for Affected Taxpayers in the Midwestern Disaster Areas Form (and Instructions) 4562: Depreciation and Amortization 5213: Election To Postpone Determination as To Whether the Presumption Applies That an Activity Is Engaged in for Profit 8582: Passive Activity Loss Limitations Schedule E (Form 1040): Supplemental Income and Losstaxmap/pubs/p527-000.htm#en_us_publink1000218956
See chapter 6, How To Get Tax Help, for information about getting these publications and forms.