Any money earned from rent is considered income and must be reported on your tax return. There are certain factors, though, that may allow you to exclude your rental income on your tax return. For instance, if you rent out a property for less than 15 days per year, then you may not be required to include the income on your return. Also, if you use the property as your home, your tax liability may be limited. In most cases, however, you need to report income from rent on your tax return.
When you’re considering your situation, remember that a vacation home can be a house, an apartment, a boat, a mobile home, or a condominium. Therefore, even if you’re renting out your boat, for example, you’ll need to report this revenue on your tax return. In addition to income tax, your earnings from rent may also be subject to Net Investment Income Tax.
You’ll want to report rental income and expenditures on Schedule E, Supplemental Income and Loss. If you’re reporting deductible expenses for personal use, you may use Schedule A, Itemized Deductions. The expenditures may include mortgage interest, property taxes and casualty losses.
In the event that you’re using the property you rented out as a home, then your rental expense deduction will be limited. The deduction you’re permitted to take for rental expenses cannot be more than the rent you received. On the other hand, if you’re using the property and also renting out a part of it, then you need to divide your expenses between the rental use and personal use.
If you rent out your property and the tenant pays less than the fair rental price, this may not be considered a true rental. In this situation, the property may be considered for personal use only.