Though all income received from rental property is taxable, the IRS (I-R-S) allows for many possible deductions to be made on the income. These deductions can include depreciation costs of your building, furniture, and appliances, as well as utility expenses, mortgage interest, and insurance premiums. It's wise to review the rules concerning this area of tax law, as rental income deductions come with several restrictions. For instance, though you can deduct real estate property taxes you've paid on your rental property, you can't deduct the cost of installing a sidewalk or sewer on it. Also, if you're renting out personal property, such as equipment or vehicles, how you report your income and expenses is determined by whether or not your rental activity is a business and conducted for profit. According to the IRS, if you use your rental property for personal purposes, then you must divide your expenses between rental and personal use. For more information on reporting rental income, consult a tax advisor or call the toll-free number for federal tax information and assistance at 1-800-829-1040.
