If you rent out a house, apartment, vacation home, room, or other property, the money you receive is generally considered rental income and may be taxable. This includes both cash payments and the fair market value of property or services you receive in exchange for renting out your property. The IRS explains rental income and reporting requirements in Publication 527, Residential Rental Property, and most rental income is reported on Schedule E (Form 1040).
What Counts as Rental Income?
Rental income includes more than just your monthly rent payments. You generally must report:
- Regular rent payments received from tenants
- Advance rent payments, even if they apply to a future year
- Payments received for canceling a lease
- Certain expenses paid by a tenant on your behalf
If a tenant pays an expense you are responsible for, that payment may need to be included as rental income.
What About Security Deposits?
A security deposit is generally not taxable rental income if you plan to return it to the tenant at the end of the lease.
However, if you keep all or part of the deposit because the tenant violated the lease agreement, the amount you keep becomes rental income in the year you keep it.
Special Rule for Short-Term Rentals
If you rent out a dwelling that is considered your residence for fewer than 15 days during the year, you generally do not have to report the rental income. In addition, you cannot deduct rental expenses related to that rental activity. See IRS Publication 527 for more details.
How Do I Report Rental Income?
Most rental real estate income and expenses are reported on Schedule E (Form 1040), Supplemental Income and Loss. Schedule E is used to report income or losses from rental real estate, royalties, and certain other activities.
Reporting Rental Income From Form 1099-MISC
Rental income is commonly reported on Form 1099-MISC, with the amount shown in Box 1 (Rents).
To enter Form 1099-MISC in the program:
- Select Federal
- Select Income – Select My Forms
- Select 1099-MISC
- Enter the payer information and the amount reported in Box 1
- Continue through the interview and create or link the appropriate Schedule E
The program will guide you through entering your rental activity and related expenses.
Reporting Rental Income Directly on Schedule E
You may not receive a Form 1099-MISC in every situation. For example:
- Your tenant paid you directly.
- Your total rental income was less than the reporting threshold for the payer.
- The payer was not required to issue a Form 1099-MISC.
If you do not receive a Form 1099-MISC, you should still report your rental income.
To enter rental income directly:
- Select Federal
- Select Income – Select My Forms
- Select Profit or Loss From Rentals and Royalties (Schedule E)
- If you were required to issue a Form 1099-MISC to contractors you paid, indicate that during the interview. Otherwise, continue.
- Enter rental income in the field labeled Rental Payments Received
Remember, you're required to report taxable rental income whether or not you receive an information return.