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Publication 17
taxmap/pub17/p17-042.htm#en_us_publink1000171641

Chapter 9
Rental Income and Expenses(p68)

For Use in Tax Year 2013

taxmap/pub17/p17-042.htm#en_us_publink1000271761
This chapter discusses rental income and expenses. It also covers the following topics.
If you sell or otherwise dispose of your rental property, see Publication 544, Sales and Other Dispositions of Assets.
If you have a loss from damage to, or theft of, rental property, see Publication 547, Casualties, Disasters, and Thefts.
If you rent a condominium or a cooperative apartment, some special rules apply to you even though you receive the same tax treatment as other owners of rental property. See Publication 527, Residential Rental Property, for more information.

taxmap/pub17/p17-042.htm#TXMP7856eac6

Useful items

You may want to see:


Publication
 527 Residential Rental Property
 534 Depreciating Property Placed in Service Before 1987
 535 Business Expenses
 925 Passive Activity and At-Risk Rules
 946 How To Depreciate Property
Form (and Instructions)
 4562: Depreciation and Amortization
 6251: Alternative Minimum Tax—Individuals
 8582: Passive Activity Loss Limitations
 Schedule E (Form 1040) : Supplemental Income and Loss
taxmap/pub17/p17-042.htm#en_us_publink1000171642

Rental Income(p68)

For Use in Tax Year 2013
rule
In most cases, you must include in your gross income all amounts you receive as rent. Rental income is any payment you receive for the use or occupation of property. In addition to amounts you receive as normal rent payments, there are other amounts that may be rental income.
taxmap/pub17/p17-042.htm#en_us_publink1000171643

When to report.(p68)

For Use in Tax Year 2013
rule
If you are a cash-basis taxpayer, you report rental income on your return for the year you actually or constructively receive it. You are a cash-basis taxpayer if you report income in the year you receive it, regardless of when it was earned. You constructively receive income when it is made available to you, for example, by being credited to your bank account.
For more information about when you constructively receive income, see Accounting Methods in chapter 1.
taxmap/pub17/p17-042.htm#en_us_publink1000171645

Advance rent.(p68)

For Use in Tax Year 2013
rule
Advance rent is any amount you receive before the period that it covers. Include advance rent in your rental income in the year you receive it regardless of the period covered or the method of accounting you use.
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Example.(p68)

You sign a 10-year lease to rent your property. In the first year, you receive $5,000 for the first year's rent and $5,000 as rent for the last year of the lease. You must include $10,000 in your income in the first year.
taxmap/pub17/p17-042.htm#en_us_publink1000171648

Canceling a lease.(p68)

For Use in Tax Year 2013
rule
If your tenant pays you to cancel a lease, the amount you receive is rent. Include the payment in your income in the year you receive it regardless of your method of accounting.
taxmap/pub17/p17-042.htm#en_us_publink1000171649

Expenses paid by tenant.(p68)

For Use in Tax Year 2013
rule
If your tenant pays any of your expenses, the payments are rental income. Because you must include this amount in income, you can deduct the expenses if they are deductible rental expenses. See Rental Expenses, later, for more information.
taxmap/pub17/p17-042.htm#en_us_publink1000171651

Property or services.(p68)

For Use in Tax Year 2013
rule
If you receive property or services, instead of money, as rent, include the fair market value of the property or services in your rental income.
If the services are provided at an agreed upon or specified price, that price is the fair market value unless there is evidence to the contrary.
taxmap/pub17/p17-042.htm#en_us_publink1000230263

Security deposits.(p68)

For Use in Tax Year 2013
rule
Do not include a security deposit in your income when you receive it if you plan to return it to your tenant at the end of the lease. But if you keep part or all of the security deposit during any year because your tenant does not live up to the terms of the lease, include the amount you keep in your income in that year.
If an amount called a security deposit is to be used as a final payment of rent, it is advance rent. Include it in your income when you receive it.
taxmap/pub17/p17-042.htm#en_us_publink1000171654

Part interest.(p68)

For Use in Tax Year 2013
rule
If you own a part interest in rental property, you must report your part of the rental income from the property.
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Rental of property also used as your home.(p68)

For Use in Tax Year 2013
rule
If you rent property that you also use as your home and you rent it less than 15 days during the tax year, do not include the rent you receive in your income and do not deduct rental expenses. However, you can deduct on Schedule A (Form 1040) the interest, taxes, and casualty and theft losses that are allowed for nonrental property. See Personal Use of Dwelling Unit (Including Vacation Home), later.