Review answers to the following common questions regarding rental property:

What is considered rental income?
Some examples are:

• Payments made by an occupant for the use of property.
• Payment to cancel a lease.
• Advance rent.
• Any security deposit kept because a tenant did not fulfill their part of the rental agreement.
  

Do not include:

• A security deposit you are holding with the intent of returning it to the tenant at the end of the lease.
• Income received from renting your home for fewer than 15 days per year

What deductions can I take as an owner of rental property?
You can deduct the following:

• Advertising in the newspaper for tenants and cost of signs.
• Cleaning supplies
• Real estate taxes in year paid
• Mortgage and other interest paid for the rental property
• Cost of insurance-hazard, flood, fire, or liability
• Payments for service such as lawn care, pest control, and trash collection
• Payments to people who maintain the property
• Tax advice and preparation fees for the part of the tax return dealing with rental property
• Cost of new locks and keys
• Commissions paid for finding tenants
• Cost of necessary transportation to and from the rental property for the purpose of maintenance, management, rent collection, picking up supplies, or checking the property (if you use your personal vehicle, either keep track of actual expenses and miles traveled or just the miles traveled).
• Cost of repairs and maintenance (not improvements) to keep your property in good condition (this includes items such as repainting and fixing floors and windows).
• Cost of renting equipment used for the rental property
• Depreciation of the property (not including the land)
• Depreciation of appliances and improvements
• Any long distance calls associated with your rental
• The court costs and attorney fees for evicting a tenant
• Expenses incurred when the property is not rented as long as you are actively trying to rent the property (even if you are renting it for the first time).
  

You cannot deduct:

• Rent lost due to vacancy
• The cost of improvements which increase the value and extend the life of the property or modify it for a new use (includes such things as a room addition, fencing, or a new roof - these items can generally be depreciated)

What Are Some Things I Should Know About Rental Property?
If you rent only part of your property, certain expenses must be divided between the part used as rental property and the part used for personal purposes.

When rental property is sold, the resulting gain or loss is treated as ordinary or capital, depending on the circumstances.