The short answer
A profit and loss statement, also called an income statement, lists a rental's income and expenses for a period and shows the net result. It is the report you read each month to run the property. It is not the same as Schedule E or a balance sheet.
On this page
What a profit and loss statement tells you
The SEC's guide to financial statements describes an income statement as a report showing how much revenue was earned over a specific period, then subtracting costs and expenses to reach net earnings or a loss. For a rental, a profit and loss statement (P&L) answers a simple question: did this property make money this month, quarter or year?
The IRS notes that good records help you monitor the progress of your rental property and prepare your financial statements. A P&L built from those records lets you compare months, compare properties and spot costs that are creeping up.
Income lines
Start with rent. IRS Publication 527 also treats these as rental income:
- Advance rent, in the year you receive it.
- Security deposit amounts you keep because the renter did not meet the lease terms.
- A payment to cancel a lease.
- Your expenses paid by a renter, such as a utility bill.
- Property or services received instead of rent, at fair market value.
A security deposit you plan to return is not income, so it should not appear as revenue.
Expense lines
Using the same categories as Schedule E saves work at tax time. The 2025 Schedule E lists advertising, auto and travel, cleaning and maintenance, commissions, insurance, legal and other professional fees, management fees, mortgage interest paid to banks, other interest, repairs, supplies, taxes, utilities, depreciation and other expenses.
Keep categories consistent month to month. A cost booked to repairs one month and supplies the next makes trends hard to read.
A simple layout
A one-property P&L for a year might read like this, with illustrative figures:
- Rent received: $24,000.
- Other rental income (deposit kept for damage): $300.
- Total income: $24,300.
- Expenses: mortgage interest $7,200, taxes $3,100, insurance $1,400, repairs $1,250, utilities $900, management fees $1,920, depreciation $8,000.
- Total expenses: $23,770.
- Net income: $530.
Without depreciation, the same property shows $8,530 of income before principal payments. That gap is why many owners read a P&L both with and without depreciation.
What stays off the P&L
- Loan principal. Schedule E has lines for mortgage interest, not principal. Principal reduces what you owe, so it belongs on the balance sheet.
- Improvements. Costs that better, restore or adapt the property are capitalized and depreciated, not expensed when paid.
- Deposits you hold. These are owed back to renters.
- Owner money in and out. Money you put in or take out, and transfers between your own accounts, are not rental income or expenses. Record them as owner contributions, owner distributions or transfers.
Cash or accrual view
On the cash basis, rent counts when received and expenses when paid. On the accrual basis, income counts when earned and expenses when incurred. Publication 527 notes that most individuals use the cash method for their returns.
A cash-basis P&L can look unusually strong in a month when a renter prepays, and weak in a month when an annual insurance bill is paid. Reading several months together, or a rolling 12 months, smooths those swings.
On a cash-basis P&L, rent a renter has not paid does not appear as income until it arrives. Your rent ledger, not the P&L, is where you watch unpaid balances.
How it differs from Schedule E
Schedule E is a tax form. It covers the tax year, reports each property separately, asks for fair rental and personal use days, includes depreciation under tax rules and limits a loss under the passive activity rules on line 22. A management P&L can cover any period, group properties any way you like and leave out depreciation if you want a view closer to cash.
Timing can differ too. Publication 527's example puts tax preparation fees paid in 2025 for the 2024 Schedule E on the 2025 Schedule E, because that is when they were paid.
The two should reconcile. Your year-end P&L, adjusted for tax-only items such as depreciation, should match the income and expenses your preparer reports.
How it differs from a balance sheet
The SEC guide describes a balance sheet as a snapshot of assets, liabilities and equity at a point in time, where assets equal liabilities plus equity. For a rental, assets include the property and bank balances, and liabilities include the mortgage balance and deposits you hold. A cash flow statement shows money in and out, including principal payments the P&L leaves out.
Read the three together: the P&L for profit, the balance sheet for what you own and owe, and cash flow for whether the account can cover next month's bills.
This guide is general information, not tax advice. Confirm how these rules apply to your situation with a tax professional.
How Rentari helps
Rentari's accounting imports bank feeds, books transactions as Revenue, Expense, Transfer, Owner contribution or Owner distribution, and supports split transactions and a chart of accounts. It builds a balance sheet and other reports from the same records. Rentari keeps the record; your preparer handles the return.
Sources and further reading
Common questions
Is a profit and loss statement the same as Schedule E?
No. Schedule E is a tax form for the tax year with tax-only rules such as depreciation and passive loss limits. A P&L is a management report for any period, though the two should reconcile.
Should my whole mortgage payment be an expense?
No. Mortgage interest is an expense. Principal reduces your loan balance and belongs on the balance sheet.
Do security deposits count as income on a P&L?
Not when you plan to return them. Amounts you keep because the renter did not meet the lease terms become income when you keep them.
How often should I review a rental P&L?
Monthly is a practical rhythm for spotting problems, with a full-year review before tax time. Compare the same months across years to account for seasonal costs.
Archive years group longstanding rental topics. This Rentari guide was published on 2026-11-14.
The Rentari team writes and updates this guide. Examples illustrate decisions and do not describe customer results. This is general education. Confirm the rules and treatment for your property with a qualified local professional. Found an error or an unclear step? Send a correction with a link to this page and the wording you’d change.
