The short answer
Rent you receive is generally taxable income, and the ordinary and necessary costs of the rental are deductible. If you or your family also use the home, the 14-day or 10% personal-use rule decides how expenses are limited. A home you use as your own and rent for fewer than 15 days in a year is not reported at all.
On this page
What counts as rental income
IRS Topic 414 says cash or the fair market value of property or services you receive for the use of property is rental income. That includes:
- Normal rent, counted when you actually or constructively receive it under the cash method most individuals use.
- Advance rent, included in the year you receive it regardless of the period covered.
- Lease cancellation payments, reported in the year received.
- Expenses a renter pays for you, which you may then deduct if they qualify.
- Services instead of rent, at their fair market value.
A security deposit is not income if you may be required to return it at the end of the lease. Any part you keep becomes income in the year you keep it.
Expenses you can deduct
The IRS says you can deduct the ordinary and necessary expenses for managing, conserving and maintaining your rental property. Publication 527 says you generally deduct rental expenses in the year you pay them. Common examples include mortgage interest, property tax, insurance, repairs, utilities you pay, advertising and management fees.
- Repairs keep the property in good working condition without adding to its value, and are generally deducted.
- Improvements must be capitalized. Publication 527 lists examples such as a heating system, central air conditioning, a water heater and a septic system.
- Uncollected rent is not deductible for a cash-method landlord, because it was never counted as income.
Publication 527 says most residential rentals that provide basic services report income and expenses on Schedule E, Part I. Topic 414 says that if you provide substantial services to renters, you report on Schedule C instead.
Depreciation basics
Depreciation lets you recover the cost of the building and improvements over time instead of deducting it at once. Key rules from Publication 527:
- Depreciation starts when the property is placed in service, meaning ready and available for rent, even before a renter moves in.
- You cannot depreciate land, because land generally does not wear out.
- Residential rental property is depreciated over 27.5 years under the general depreciation system.
- If you convert your former home into a rental, the basis for depreciation is the lesser of fair market value or adjusted basis on the date of conversion.
The 14-day and 10% personal-use rule
Publication 527 says you use a dwelling unit as a home during the year if you use it for personal purposes more than the greater of 14 days or 10% of the total days it is rented to others at a fair rental price. A dwelling unit includes a house, apartment, condominium, mobile home, boat or vacation home.
A day of personal use includes any day the unit is used by you, by a family member (unless they use it as their main home and pay a fair rental price), or by anyone paying less than a fair rental price. A day you spend working substantially full time repairing and maintaining the property does not count as personal use.
Two results follow:
- Fewer than 15 days: Topic 415 says that if you use the unit as a home and rent it for fewer than 15 days, you do not report any of the rental income and do not deduct any expenses as rental expenses.
- Mixed use: you divide expenses between rental and personal use. The rental share is the days rented at a fair rental price divided by the total days the unit is used. If the unit counts as a home, Publication 527 says rental expenses above rental income cannot offset your other income; the excess carries forward.
Schedule E line 2 asks for each property's fair rental days and personal use days, so keep a calendar.
Renting to relatives below fair rent
Publication 527 says a fair rental price is generally the rent an unrelated person would pay, and rent is not fair if it is substantially less than rents charged for similar properties. For these rules, family includes your spouse, siblings, half siblings, ancestors and lineal descendants.
If you rent to a relative at a discount, every day they stay counts as a personal-use day. The home can then count as your home under the 14-day or 10% test, and your rental deductions become limited. If the relative uses it as their main home and pays a fair rental price, those days are rental days instead.
A rental that is not run to make a profit has its own rules. Publication 527 says you still report the income, on Schedule 1 (Form 1040), line 8j. It also describes a presumption of profit when rental income is more than rental expenses for at least 3 years out of 5 consecutive years.
Records to keep
The IRS says good records help you monitor your rental, and that you generally need documentary evidence, such as receipts, canceled checks or bills, to support expenses. Keep:
- Leases, rent records and deposit records.
- Receipts and invoices for every expense, with notes separating repairs from improvements.
- The closing statement and records of improvements for depreciation.
- A day-by-day log of rental days and personal-use days if anyone else stays there.
The IRS generally says to keep records for 3 years, and to keep property records until the period of limitations expires for the year you dispose of the property.
This guide is general information, not tax advice. Confirm how these rules apply to your situation with a tax professional.
How Rentari helps
Rentari records rent with payment receipts and keeps security deposits separate from rent on the lease. Its accounting imports bank feeds, books income and expenses into your chart of accounts and tracks fixed assets with depreciation entries. Rentari keeps the record; your preparer completes the return.
Sources and further reading
Common questions
Do I report rent if I rent out my home for one week a year?
Not if you also use it as a home. Topic 415 says that if you use a unit as a home and rent it for fewer than 15 days, you do not report the rental income and do not deduct rental expenses.
Is a security deposit taxable when I collect it?
Not if you may have to return it. Any part you keep becomes income in the year you keep it, and a deposit used as the final month's rent is advance rent.
Can I deduct expenses if I rent to my daughter below market rent?
Days rented to a family member below a fair rental price count as personal-use days, which can make the property your home under the 14-day or 10% test and limit deductions. Ask a tax professional about your facts.
Do days I spend fixing the rental count as personal use?
No. Publication 527 says a day spent working substantially full time repairing and maintaining the property is not a personal-use day.
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.
