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taxmap/pubs/p527-000.htm#en_us_publink1000218940
Publication 527

Residential 
Rental 
Property

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(Including Rental of Vacation Homes)

What's New(p1)


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Qualified joint ventures reporting rental real estate income.(p1)
Beginning in 2011, qualified joint ventures reporting rental real estate income not subject to self-employment tax must report that income on Schedule E instead of Schedule C. See the Instructions for Schedule E (Form 1040).
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Special depreciation allowance.(p1)
For qualified property acquired after December 31, 2010, and placed in service before January 1, 2013, the additional first year depreciation is 100% of the depreciable basis of the property instead of 50%. See Publication 946, How To Depreciate Property, for more information.
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Future developments.(p2)
The IRS has created a page on IRS.gov for information about Publication 527, at www.irs.gov/pub527. Information about any future developments affecting Publication 527 (such as legislation enacted after we release it) will be posted on that page.

Reminders(p2)


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Tax-free exchange of rental property used for personal purposes.(p2)
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, Sales and Other Dispositions of Assets, chapter 1.
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Additional first-year depreciation for certain MACRS property.(p2)
If, prior to December 31, 2010, you placed in service certain longer-lived and transportation property with a recovery period of 20 years or less, you can elect a 50% special depreciation allowance (in addition to your regular MACRS depreciation deduction). For certain longer-lived and transportation property with a recovery period of 20 years or less acquired after December 31, 2010, and placed in service before January 1, 2013, your special depreciation allowance is 100% unless you choose not to take the special depreciation allowance. See Publication 946 for more information.
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Special depreciation allowance for Gulf Opportunity (GO) Zone.(p2)
You can take a special depreciation allowance for qualified property located in areas damaged by the hurricanes occurring during 2005. To be qualified, the property must be located in specified counties or parishes, acquired after August 27, 2005, and placed in service before January 1, 2012. For more information, see chapter 3 in Publication 946.
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Special depreciation allowance for disaster assistance property.(p2)
You can take a special depreciation allowance for qualified property placed in service in federally declared disaster areas in which the disaster occurred after December 31, 2007, and before January 1, 2013. The qualifying property must be placed in service on or before the last day of the third calendar year following the applicable disaster date (the fourth calendar year in the case of nonresidential real property and residential rental property). For example, in September 2011 certain areas of the Northeast were declared federal disaster areas due to Hurricane Irene. To qualify for the special depreciation allowance, you would have to place an asset in service, in the disaster area by December 31, 2014 (December 31, 2015 in the case of nonresidential real property and residential rental property). A list of the federally declared disaster areas is available at the FEMA website at www.fema.gov. For more information, see chapter 3 in Publication 946.
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Expensing of qualified expenses allowed in federally declared disaster areas.(p2)
You can generally deduct, rather than capitalize, qualified disaster expenses paid or incurred after December 31, 2007. See Publication 535, Business Expenses, for more information.
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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, Information for Affected Taxpayers in the Midwestern Disaster Areas, to see if your rental property is in a qualifying area and for details on the deduction.
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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.

taxmap/pubs/p527-000.htm#TXMP5dd892beIntroduction

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. In most cases, 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, 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.
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Sale of rental property.(p2)

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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.
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Sale of main home used as rental property.(p2)
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.
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Comments and suggestions.(p2)

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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 and Specialty Forms and Publications Branch
SE:W:CAR:MP:T:I
1111 Constitution Ave. NW, IR-6526
Washington, DC 20224


We respond to many letters by telephone. Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence.
You can email us at taxforms@irs.gov. Please put "Publications Comment" on the subject line. You can also send us comments from www.irs.gov/formspubs/. Select "Comment on Tax Forms and Publications" under "Information about."
Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products.
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Ordering forms and publications.(p2)
Visit www.irs.gov/formspubs/ 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
1201 N. Mitsubishi Motorway
Bloomington, IL 61705-6613


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Tax questions.(p2)
If you have a tax question, check the information available on IRS.gov or call 1-800-829-1040. We cannot answer tax questions sent to either of the above addresses.

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Useful items

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 Loss
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(p3)

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See Chapter 6, How To Get Tax Help, for information about getting these publications and forms.