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State Efile

State efile Index A Additional Medicare Tax, What's New for 2013, What's New, Employment Taxes, Additional Medicare Tax. State efile Advertising, Advertising expenses. State efile Amortization Anti-abuse rule, Anti-abuse rule. State efile Anti-churning rules, Anti-Churning Rules Atmospheric pollution control facilities, Pollution Control Facilities Corporate organization costs, Costs of Organizing a Corporation Dispositions of section 197 intangibles, Disposition of Section 197 Intangibles Experimental costs, Research and Experimental Costs Geological and geophysical costs, Geological and Geophysical Costs How to deduct, How To Deduct Amortization Incorrect amount deducted, Incorrect Amount of Amortization Deducted Partnership organization costs, Costs of Organizing a Partnership Pollution control facilities, Pollution Control Facilities Reforestation costs, Reforestation Costs Reforestation expenses, Reforestation Costs Related person, Related person. State efile Research costs, Research and Experimental Costs Section 197 intangibles defined, Section 197 Intangibles Defined Start-up costs, Business Start-Up Costs Starting a businesscosts, Starting a Business Anticipated liabilities, Anticipated liabilities. State efile Assessments, local, Taxes for local benefits. State efile Assistance (see Tax help) At-risk limits, At-risk limits. State efile Attorney fees, Legal and professional fees. State efile Awards, Achievement awards. State efile , Length-of-service award. State efile , Safety achievement award. State efile B Bad debts Defined, Definition of Business Bad Debt How to treat, How To Claim a Business Bad Debt Recovery, Recovery of a Bad Debt Types of, Types of Business Bad Debts When worthless, When a Debt Becomes Worthless Bonuses Employee, Bonuses Royalties, Bonuses and advanced royalties. State efile Bribes, Bribes and kickbacks. State efile Business Assets, Business Assets Books and records, Business books and records, etc. State efile Meal expenses, Meals and Entertainment Use of car, Business use of your car. State efile , Car and truck expenses. State efile Use of home, Business use of your home. State efile C Campaign contribution, Political contributions. State efile Capital expenses, Capital Expenses, Capital versus Deductible Expenses Capitalization of interest, Capitalization of Interest Car allowance, Car allowance. State efile Car and truck expenses, Car and truck expenses. State efile Carrying charges, Carrying Charges Charitable contributions, Charitable contributions. State efile Circulation costs, newspapers and periodicals, Circulation Costs Club dues, Club dues and membership fees. State efile Comments on publication, Comments and suggestions. State efile Commitment fees, Commitment fees or standby charges. State efile Computer software, Computer software. State efile Constant-yield method, OID, Constant-yield method. State efile Contested liability, Contested liability. State efile Contributions Charitable, Charitable contributions. State efile Political, Political contributions. State efile Copyrights, Patents, copyrights, etc. State efile Cost depletion, Cost Depletion Cost of getting lease, Cost of Getting a Lease, Getting a Lease Cost of goods sold, Cost of Goods Sold Cost recovery, Cost recovery. State efile Covenant not to compete, Covenant not to compete. State efile Credit card convenience fees, Credit card convenience fees. State efile D De minimis OID, De minimis OID. State efile Debt-financed distributions, Debt-financed distribution. State efile Definitions Business bad debt, Definition of Business Bad Debt Necessary expense, What Can I Deduct? Ordinary expense, What Can I Deduct? Section 197 intangibles, Section 197 Intangibles Defined Demolition expenses, Demolition expenses or losses. State efile Depletion Mineral property, Mineral Property Oil and gas wells, Oil and Gas Wells Percentage table, Mines and other natural deposits. State efile Timber, Timber Who can claim, Who Can Claim Depletion? Depreciation (see Cost recovery) Development costs, miners, Development Costs Disabled, improvements for, Barrier Removal Costs Drilling and development costs, Intangible Drilling Costs Dues, membership, Club dues and membership fees. State efile E Economic interest, Who Can Claim Depletion? Economic performance, Economic performance. State efile Education expenses, Education Expenses, Education expenses. State efile Elderly, improvements for, Barrier Removal Costs Employee benefit programs, Employee benefit programs. State efile Employment taxes, Employment Taxes Entertainment, Reimbursement of Travel, Meals, and Entertainment Excise taxes, Excise taxes. State efile Experimentation costs, Research and Experimental Costs, Research and Experimental Costs Exploration costs, Exploration Costs F Fees Commitment, Commitment fees or standby charges. State efile Legal and professional, Legal and professional fees. State efile Regulatory, Licenses and regulatory fees. State efile Tax return preparation, Tax preparation fees. State efile Fines, Penalties and fines. State efile Forgone, Forgone interest. State efile Forgone interest, Forgone interest. State efile Form 3115, Form 3115. State efile , Changing Your Accounting Method 4562, How To Deduct Amortization 5213, Using the presumption later. State efile 8826, Disabled access credit. State efile 8885, Health coverage tax credit. State efile T, Form T. State efile Franchise, Franchise, trademark, or trade name. State efile , Franchise, trademark, trade name. State efile Franchise taxes, Franchise taxes. State efile Free tax services, Free help with your tax return. State efile Fringe benefits, Fringe Benefits Fuel taxes, Fuel taxes. State efile G Gas wells, Natural Gas Wells Geological and geophysical costs Development, oil and gas, Geological and Geophysical Costs Exploration, oil and gas, Geological and Geophysical Costs Geothermal wells, Intangible Drilling Costs, Mines and Geothermal Deposits Gifts, nominal value, Gifts of nominal value. State efile Going into business, Going Into Business, Starting a Business Goodwill, Goodwill. State efile Gross income, not-for-profit activity, Gross Income H Health insurance, deduction for self-employed, Self-Employed Health Insurance Deduction Heating equipment, Heating equipment. State efile Help (see Tax help) Home, business use of, Business use of your home. State efile I Impairment-related expenses, Impairment-related expenses. State efile Improvements, Improvements By lessee, Improvements by Lessee For disabled and elderly, Barrier Removal Costs Income taxes, Income Taxes Incorrect amount of amortization deducted, Incorrect Amount of Amortization Deducted Insurance Capitalized premiums, Capitalized Premiums Deductible premiums, Deductible Premiums Nondeductible premiums, Nondeductible Premiums Self-employed individuals, Self-Employed Health Insurance Deduction Intangible drilling costs, Intangible Drilling Costs Intangibles, amortization, Section 197 Intangibles Interest, Forgone interest. State efile Allocation of, Allocation of Interest Below-market, Below-Market Loans Business expense for, Interest Capitalized, Capitalized interest. State efile , Capitalization of Interest Carrying charge, Carrying Charges Deductible, Interest You Can Deduct Life insurance policies, Interest on loans with respect to life insurance policies. State efile Not deductible, Interest You Cannot Deduct Refunds of, Refunds of interest. State efile When to deduct, When To Deduct Interest Internet-related expenses, Internet-related expenses. State efile Interview expenses, Interview expense allowances. State efile K Key person, Who is a key person? Kickbacks, Bribes and kickbacks. State efile L Leases Canceling, Canceling a lease. State efile Cost of getting, Cost of Getting a Lease, Getting a Lease Improvements by lessee, Improvements by Lessee Leveraged, Leveraged leases. State efile Mineral, Bonuses and advanced royalties. State efile Oil and gas, Bonuses and advanced royalties. State efile Sales distinguished, Lease or purchase. State efile Taxes on, Taxes on Leased Property Legal and professional fees, Legal and professional fees. State efile Licenses, Government-granted license, permit, etc. State efile , Licenses and regulatory fees. State efile Life insurance coverage, Life insurance coverage. State efile Limit on deductions, Not-for-Profit Activities Line of credit, Line of credit (continuous borrowings). State efile Loans Below-market interestrate, Below-Market Loans Discounted, Discounted loan. State efile Loans or Advances, Loans or Advances Lobbying expenses, Lobbying expenses. State efile Long-term care insurance, Qualified long-term care insurance. State efile Losses, Limits on losses. State efile , Not-for-Profit Activities At-risk limits, At-risk limits. State efile Net operating, Net operating loss. State efile Passive activities, Passive activities. State efile M Machinery parts, Machinery parts. State efile Meals, Reimbursement of Travel, Meals, and Entertainment Meals and entertainment, Meals and Entertainment Meals and lodging, Meals and lodging. State efile Methods of accounting, When Can I Deduct an Expense? Mining Depletion, Mines and Geothermal Deposits Development costs, Development Costs Exploration costs, Exploration Costs Mortgage, Mortgage. State efile , Expenses paid to obtain a mortgage. State efile Moving expenses, machinery, Moving machinery. State efile N Natural gas, Natural Gas Wells Nonqualifying intangibles, Assets That Are Not Section 197 Intangibles Not-for-profit activities, Not-for-Profit Activities Not-for-profit activity, gross income, Gross Income O Office in home, Business use of your home. State efile Oil and gas wells Depletion, Oil and Gas Wells Drilling costs, Intangible Drilling Costs Partnerships, Partnerships and S Corporations S corporations, Partnerships and S Corporations Optional safe harbor method, Optional safe harbor method. State efile Optional write-off method Circulation costs, Optional Write-off of Certain Tax Preferences Experimental costs, Optional Write-off of Certain Tax Preferences Intangible drilling and development costs, Optional Write-off of Certain Tax Preferences Mining exploration and development costs, Optional Write-off of Certain Tax Preferences Research costs, Optional Write-off of Certain Tax Preferences Organization costs Corporate, Costs of Organizing a Corporation Partnership, Costs of Organizing a Partnership Organizational costs, Business Start-Up and Organizational Costs Original issue discount, Original issue discount (OID). State efile Outplacement services, Outplacement services. State efile P Passive activities, Passive activities. State efile Payments in kind, Payments in kind. State efile Penalties, Prepayment penalty. State efile Deductible, Penalties and fines. State efile Nondeductible, Penalties and fines. State efile Prepayment, Prepayment penalty. State efile Per diem and car allowances, Per Diem and Car Allowances Percentage depletion, Percentage Depletion Personal property tax, Personal property tax. State efile Political contributions, Political contributions. State efile Pollution control facilities, Pollution Control Facilities Prepaid expense, Prepayment. State efile Extends useful life, Prepayment. State efile Interest, Prepaid interest. State efile , Prepaid interest. State efile Rent, Rent paid in advance. State efile Prepayment penalty, Prepayment penalty. State efile Presumption of profit, Not-for-Profit Activities Publications (see Tax help) R Real estate taxes, Real Estate Taxes Recapture Exploration expenses, Recapture of exploration expenses. State efile Timber property, Recapture. State efile Recordkeeping, Partnerships and S Corporations Recovery of amount deducted, Recovery of amount deducted (tax benefit rule). State efile Refiners who cannot claim percentage depletion, Refiners who cannot claim percentage depletion. State efile Reforestation costs, Reforestation Costs, Reforestation Costs Regulatory fees, Licenses and regulatory fees. State efile Reimbursements, Reimbursements Business expenses, Reimbursements for Business Expenses Mileage, Per Diem and Car Allowances Nonaccountable plan, Nonaccountable Plans Per diem , Per Diem and Car Allowances Related persons Anti-churning rules, Related person. State efile Coal or iron ore, Disposal to related person. State efile Payments to, Related person. State efile , Related person. State efile Refiners, Related person. State efile Unreasonable rent, Unreasonable rent. State efile Removal, Retired Asset Removal Costs, Barrier Removal Costs Rent expense, capitalizing, Capitalizing Rent Expenses Repairs, Repairs. State efile Repayments (claim of right), Repayments. State efile Research costs, Research and Experimental Costs, Research and Experimental Costs Retiree drug subsidy, What's New for 2013, What's New S Sales taxes, Sales tax. State efile Section 179 expense deduction (see Cost recovery) Self-employed health insurance deduction, Self-Employed Health Insurance Deduction Self-employment tax, Self-employment tax. State efile Self-insurance, reserve for, Nondeductible Premiums Sick pay, Sick and Vacation Pay Standard meal allowance, Standard meal allowance. State efile Standard mileage rate, Car allowance. State efile (see Business use of your car) Standby charges, Commitment fees or standby charges. State efile Start-up costs, Business Start-Up and Organizational Costs, Business Start-Up Costs Subscriptions, Subscriptions. State efile Suggestions for publication, Comments and suggestions. State efile Supplies and materials, Supplies and materials. State efile T Tax help, How To Get Tax Help Tax preparation fees, Tax preparation fees. State efile Taxes, Taxes on Leased Property Carrying charge, Carrying Charges Employment, Employment Taxes Excise, Excise taxes. State efile Franchise, Franchise taxes. State efile Fuel, Fuel taxes. State efile Income, Income Taxes Leased property, Taxes on Leased Property Personal property, Personal property tax. State efile Real estate, Real Estate Taxes Sales, Sales tax. State efile Unemployment fund, Unemployment fund taxes. State efile Telephone, Telephone. State efile Timber, Reforestation Costs, Timber Tools, Tools. State efile Trademark, trade name, Franchise, trademark, or trade name. State efile , Franchise, trademark, trade name. State efile Travel, Reimbursement of Travel, Meals, and Entertainment TTY/TDD information, How To Get Tax Help U Unemployment fund taxes, Unemployment fund taxes. State efile Unpaid expenses, related person, Related person. State efile Utilities, Utilities. State efile V Vacation pay, Sick and Vacation Pay W Wages Property, Property Tests for deducting pay, Tests for Deducting Pay Welfare benefit funds, Welfare benefit funds. State efile Prev  Up     Home   More Online Publications
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The State Efile

State efile 9. State efile   Rental Income and Expenses Table of Contents Introduction Useful Items - You may want to see: Rental Income Rental ExpensesVacant while listed for sale. State efile Repairs and Improvements Other Expenses Property Changed to Rental Use Renting Part of Property Not Rented for Profit Personal Use of Dwelling Unit (Including Vacation Home)Example. State efile Dividing Expenses Dwelling Unit Used as a Home Reporting Income and Deductions DepreciationChanging your accounting method to deduct unclaimed depreciation. State efile Limits on Rental LossesAt-Risk Rules Passive Activity Limits How To Report Rental Income and ExpensesSchedule E (Form 1040) Introduction This chapter discusses rental income and expenses. State efile It also covers the following topics. State efile Personal use of dwelling unit (including vacation home). State efile Depreciation. State efile Limits on rental losses. State efile How to report your rental income and expenses. State efile If you sell or otherwise dispose of your rental property, see Publication 544, Sales and Other Dispositions of Assets. State efile If you have a loss from damage to, or theft of, rental property, see Publication 547, Casualties, Disasters, and Thefts. State efile If you rent a condominium or a cooperative apartment, some special rules apply to you even though you receive the same tax treatment as other owners of rental property. State efile See Publication 527, Residential Rental Property, for more information. State efile Useful Items - You may want to see: Publication 527 Residential Rental Property 534 Depreciating Property Placed in Service Before 1987 535 Business Expenses 925 Passive Activity and At-Risk Rules 946 How To Depreciate Property Form (and Instructions) 4562 Depreciation and Amortization 6251 Alternative Minimum Tax—Individuals 8582 Passive Activity Loss Limitations Schedule E (Form 1040) Supplemental Income and Loss Rental Income In most cases, you must include in your gross income all amounts you receive as rent. State efile Rental income is any payment you receive for the use or occupation of property. State efile In addition to amounts you receive as normal rent payments, there are other amounts that may be rental income. State efile When to report. State efile   If you are a cash-basis taxpayer, you report rental income on your return for the year you actually or constructively receive it. State efile You are a cash-basis taxpayer if you report income in the year you receive it, regardless of when it was earned. State efile You constructively receive income when it is made available to you, for example, by being credited to your bank account. State efile   For more information about when you constructively receive income, see Accounting Methods in chapter 1. State efile Advance rent. State efile   Advance rent is any amount you receive before the period that it covers. State efile Include advance rent in your rental income in the year you receive it regardless of the period covered or the method of accounting you use. State efile Example. State efile You sign a 10-year lease to rent your property. State efile In the first year, you receive $5,000 for the first year's rent and $5,000 as rent for the last year of the lease. State efile You must include $10,000 in your income in the first year. State efile Canceling a lease. State efile   If your tenant pays you to cancel a lease, the amount you receive is rent. State efile Include the payment in your income in the year you receive it regardless of your method of accounting. State efile Expenses paid by tenant. State efile   If your tenant pays any of your expenses, the payments are rental income. State efile Because you must include this amount in income, you can deduct the expenses if they are deductible rental expenses. State efile See Rental Expenses , later, for more information. State efile Property or services. State efile   If you receive property or services, instead of money, as rent, include the fair market value of the property or services in your rental income. State efile   If the services are provided at an agreed upon or specified price, that price is the fair market value unless there is evidence to the contrary. State efile Security deposits. State efile   Do not include a security deposit in your income when you receive it if you plan to return it to your tenant at the end of the lease. State efile But if you keep part or all of the security deposit during any year because your tenant does not live up to the terms of the lease, include the amount you keep in your income in that year. State efile   If an amount called a security deposit is to be used as a final payment of rent, it is advance rent. State efile Include it in your income when you receive it. State efile Part interest. State efile   If you own a part interest in rental property, you must report your part of the rental income from the property. State efile Rental of property also used as your home. State efile   If you rent property that you also use as your home and you rent it less than 15 days during the tax year, do not include the rent you receive in your income and do not deduct rental expenses. State efile However, you can deduct on Schedule A (Form 1040) the interest, taxes, and casualty and theft losses that are allowed for nonrental property. State efile See Personal Use of Dwelling Unit (Including Vacation Home) , later. State efile Rental Expenses This part discusses expenses of renting property that you ordinarily can deduct from your rental income. State efile It includes information on the expenses you can deduct if you rent part of your property, or if you change your property to rental use. State efile Depreciation , which you can also deduct from your rental income, is discussed later. State efile Personal use of rental property. State efile   If you sometimes use your rental property for personal purposes, you must divide your expenses between rental and personal use. State efile Also, your rental expense deductions may be limited. State efile See Personal Use of Dwelling Unit (Including Vacation Home) , later. State efile Part interest. State efile   If you own a part interest in rental property, you can deduct expenses that you paid according to your percentage of ownership. State efile When to deduct. State efile   If you are a cash-basis taxpayer, you generally deduct your rental expenses in the year you pay them. State efile Depreciation. State efile   You can begin to depreciate rental property when it is ready and available for rent. State efile See Placed-in-Service under When Does Depreciation Begin and End in chapter 2 of Publication 527. State efile Pre-rental expenses. State efile   You can deduct your ordinary and necessary expenses for managing, conserving, or maintaining rental property from the time you make it available for rent. State efile Uncollected rent. State efile   If you are a cash-basis taxpayer, do not deduct uncollected rent. State efile Because you have not included it in your income, it is not deductible. State efile Vacant rental property. State efile   If you hold property for rental purposes, you may be able to deduct your ordinary and necessary expenses (including depreciation) for managing, conserving, or maintaining the property while the property is vacant. State efile However, you cannot deduct any loss of rental income for the period the property is vacant. State efile Vacant while listed for sale. State efile   If you sell property you held for rental purposes, you can deduct the ordinary and necessary expenses for managing, conserving, or maintaining the property until it is sold. State efile If the property is not held out and available for rent while listed for sale, the expenses are not deductible rental expenses. State efile Repairs and Improvements Generally, an expense for repairing or maintaining your rental property may be deducted if you are not required to capitalize the expense. State efile Improvements. State efile   You must capitalize any expense you pay to improve your rental property. State efile An expense is for an improvement if it results in a betterment to your property, restores your property, or adapts your property to a new or different use. State efile Betterments. State efile   Expenses that may result in a betterment to your property include expenses for fixing a pre-existing defect or condition, enlarging or expanding your property, or increasing the capacity, strength, or quality of your property. State efile Restoration. State efile   Expenses that may be for restoration include expenses for replacing a substantial structural part of your property, repairing damage to your property after you properly adjusted the basis of your property as a result of a casualty loss, or rebuilding your property to a like-new condition. State efile Adaptation. State efile   Expenses that may be for adaptation include expenses for altering your property to a use that is not consistent with the intended ordinary use of your property when you began renting the property. State efile Separate the costs of repairs and improvements, and keep accurate records. State efile You will need to know the cost of improvements when you sell or depreciate your property. State efile The expenses you capitalize for improving your property can generally be depreciated as if the improvement were separate property. State efile Other Expenses Other expenses you can deduct from your rental income include advertising, cleaning and maintenance, utilities, fire and liability insurance, taxes, interest, commissions for the collection of rent, ordinary and necessary travel and transportation, and other expenses, discussed next. State efile Insurance premiums paid in advance. State efile   If you pay an insurance premium for more than one year in advance, for each year of coverage you can deduct the part of the premium payment that will apply to that year. State efile You cannot deduct the total premium in the year you pay it. State efile Legal and other professional fees. State efile   You can deduct, as a rental expense, legal and other professional expenses, such as tax return preparation fees you paid to prepare Schedule E (Form 1040), Part I. State efile For example, on your 2013 Schedule E, you can deduct fees paid in 2013 to prepare your 2012 Schedule E, Part I. State efile You can also deduct, as a rental expense, any expense (other than federal taxes and penalties) you paid to resolve a tax underpayment related to your rental activities. State efile Local benefit taxes. State efile   In most cases, you cannot deduct charges for local benefits that increase the value of your property, such as charges for putting in streets, sidewalks, or water and sewer systems. State efile These charges are nondepreciable capital expenditures, and must be added to the basis of your property. State efile However, you can deduct local benefit taxes that are for maintaining, repairing, or paying interest charges for the benefits. State efile Local transportation expenses. State efile    You may be able to deduct your ordinary and necessary local transportation expenses if you incur them to collect rental income or to manage, conserve, or maintain your rental property. State efile However, transportation expenses incurred to travel between your home and a rental property generally constitute nondeductible commuting costs unless you use your home as your principal place of business. State efile See Publication 587, Business Use of Your Home, for information on determining if your home office qualifies as a principal place of business. State efile   Generally, if you use your personal car, pickup truck, or light van for rental activities, you can deduct the expenses using one of two methods: actual expenses or the standard mileage rate. State efile For 2013, the standard mileage rate for business use is 56. State efile 5 cents per mile. State efile For more information, see chapter 26. State efile    To deduct car expenses under either method, you must keep records that follow the rules in chapter 26. State efile In addition, you must complete Form 4562, Part V, and attach it to your tax return. State efile Rental of equipment. State efile   You can deduct the rent you pay for equipment that you use for rental purposes. State efile However, in some cases, lease contracts are actually purchase contracts. State efile If so, you cannot deduct these payments. State efile You can recover the cost of purchased equipment through depreciation. State efile Rental of property. State efile   You can deduct the rent you pay for property that you use for rental purposes. State efile If you buy a leasehold for rental purposes, you can deduct an equal part of the cost each year over the term of the lease. State efile Travel expenses. State efile   You can deduct the ordinary and necessary expenses of traveling away from home if the primary purpose of the trip is to collect rental income or to manage, conserve, or maintain your rental property. State efile You must properly allocate your expenses between rental and nonrental activities. State efile You cannot deduct the cost of traveling away from home if the primary purpose of the trip was to improve your property. State efile You recover the cost of improvements by taking depreciation. State efile For information on travel expenses, see chapter 26. State efile    To deduct travel expenses, you must keep records that follow the rules in chapter 26. State efile   See Rental Expenses in Publication 527 for more information. State efile Property Changed to Rental Use If you change your home or other property (or a part of it) to rental use at any time other than the beginning of your tax year, you must divide yearly expenses, such as taxes and insurance, between rental use and personal use. State efile You can deduct as rental expenses only the part of the expense that is for the part of the year the property was used or held for rental purposes. State efile You cannot deduct depreciation or insurance for the part of the year the property was held for personal use. State efile However, you can include the home mortgage interest, qualified mortgage insurance premiums, and real estate tax expenses for the part of the year the property was held for personal use as an itemized deduction on Schedule A (Form 1040). State efile Example. State efile Your tax year is the calendar year. State efile You moved from your home in May and started renting it out on June 1. State efile You can deduct as rental expenses seven-twelfths of your yearly expenses, such as taxes and insurance. State efile Starting with June, you can deduct as rental expenses the amounts you pay for items generally billed monthly, such as utilities. State efile Renting Part of Property If you rent part of your property, you must divide certain expenses between the part of the property used for rental purposes and the part of the property used for personal purposes, as though you actually had two separate pieces of property. State efile You can deduct the expenses related to the part of the property used for rental purposes, such as home mortgage interest, qualified mortgage insurance premiums, and real estate taxes, as rental expenses on Schedule E (Form 1040). State efile You can also deduct as rental expenses a portion of other expenses that normally are nondeductible personal expenses, such as expenses for electricity or painting the outside of your house. State efile There is no change in the types of expenses deductible for the personal-use part of your property. State efile Generally, these expenses may be deducted only if you itemize your deductions on Schedule A (Form 1040). State efile You cannot deduct any part of the cost of the first phone line even if your tenants have unlimited use of it. State efile You do not have to divide the expenses that belong only to the rental part of your property. State efile For example, if you paint a room that you rent, or if you pay premiums for liability insurance in connection with renting a room in your home, your entire cost is a rental expense. State efile If you install a second phone line strictly for your tenants' use, all of the cost of the second line is deductible as a rental expense. State efile You can deduct depreciation, discussed later, on the part of the house used for rental purposes as well as on the furniture and equipment you use for rental purposes. State efile How to divide expenses. State efile   If an expense is for both rental use and personal use, such as mortgage interest or heat for the entire house, you must divide the expense between the rental use and the personal use. State efile You can use any reasonable method for dividing the expense. State efile It may be reasonable to divide the cost of some items (for example, water) based on the number of people using them. State efile The two most common methods for dividing an expense are based on (1) the number of rooms in your home, and (2) the square footage of your home. State efile Not Rented for Profit If you do not rent your property to make a profit, you can deduct your rental expenses only up to the amount of your rental income. State efile You cannot deduct a loss or carry forward to the next year any rental expenses that are more than your rental income for the year. State efile For more information about the rules for an activity not engaged in for profit, see Not-for-Profit Activities in chapter 1 of Publication 535. State efile Where to report. State efile   Report your not-for-profit rental income on Form 1040, line 21. State efile For example, you can include your mortgage interest and any qualified mortgage insurance premiums (if you use the property as your main home or second home), real estate taxes, and casualty losses on the appropriate lines of Schedule A (Form 1040) if you itemize your deductions. State efile   If you itemize your deductions, claim your other rental expenses, subject to the rules explained in chapter 1 of Publication 535, as miscellaneous itemized deductions on Form 1040, Schedule A, line 23. State efile You can deduct these expenses only if they, together with certain other miscellaneous itemized deductions, total more than 2% of your adjusted gross income. State efile Personal Use of Dwelling Unit (Including Vacation Home) If you have any personal use of a dwelling unit (including a vacation home) that you rent, you must divide your expenses between rental use and personal use. State efile In general, your rental expenses will be no more than your total expenses multiplied by a fraction; the denominator of which is the total number of days the dwelling unit is used and the numerator of which is the total number of days actually rented at a fair rental price. State efile Only your rental expenses may be deducted on Schedule E (Form 1040). State efile Some of your personal expenses may be deductible if you itemize your deductions on Schedule A (Form 1040). State efile You must also determine if the dwelling unit is considered a home. State efile The amount of rental expenses that you can deduct may be limited if the dwelling unit is considered a home. State efile Whether a dwelling unit is considered a home depends on how many days during the year are considered to be days of personal use. State efile There is a special rule if you used the dwelling unit as a home and you rented it for less than 15 days during the year. State efile Dwelling unit. State efile   A dwelling unit includes a house, apartment, condominium, mobile home, boat, vacation home, or similar property. State efile It also includes all structures or other property belonging to the dwelling unit. State efile A dwelling unit has basic living accommodations, such as sleeping space, a toilet, and cooking facilities. State efile   A dwelling unit does not include property used solely as a hotel, motel, inn, or similar establishment. State efile Property is used solely as a hotel, motel, inn, or similar establishment if it is regularly available for occupancy by paying customers and is not used by an owner as a home during the year. State efile Example. State efile   You rent a room in your home that is always available for short-term occupancy by paying customers. State efile You do not use the room yourself, and you allow only paying customers to use the room. State efile The room is used solely as a hotel, motel, inn, or similar establishment and is not a dwelling unit. State efile Dividing Expenses If you use a dwelling unit for both rental and personal purposes, divide your expenses between the rental use and the personal use based on the number of days used for each purpose. State efile When dividing your expenses, follow these rules. State efile Any day that the unit is rented at a fair rental price is a day of rental use even if you used the unit for personal purposes that day. State efile This rule does not apply when determining whether you used the unit as a home. State efile Any day that the unit is available for rent but not actually rented is not a day of rental use. State efile Example. State efile Your beach cottage was available for rent from June 1 through August 31 (92 days). State efile During that time, except for the first week in August (7 days) when you were unable to find a renter, you rented the cottage at a fair rental price. State efile The person who rented the cottage for July allowed you to use it over the weekend (2 days) without any reduction in or refund of rent. State efile Your family also used the cottage during the last 2 weeks of May (14 days). State efile The cottage was not used at all before May 17 or after August 31. State efile You figure the part of the cottage expenses to treat as rental expenses as follows. State efile The cottage was used for rental a total of 85 days (92 − 7). State efile The days it was available for rent but not rented (7 days) are not days of rental use. State efile The July weekend (2 days) you used it is rental use because you received a fair rental price for the weekend. State efile You used the cottage for personal purposes for 14 days (the last 2 weeks in May). State efile The total use of the cottage was 99 days (14 days personal use + 85 days rental use). State efile Your rental expenses are 85/99 (86%) of the cottage expenses. State efile Note. State efile When determining whether you used the cottage as a home, the July weekend (2 days) you used it is considered personal use even though you received a fair rental price for the weekend. State efile Therefore, you had 16 days of personal use and 83 days of rental use for this purpose. State efile Because you used the cottage for personal purposes more than 14 days and more than 10% of the days of rental use (8 days), you used it as a home. State efile If you have a net loss, you may not be able to deduct all of the rental expenses. State efile See Dwelling Unit Used as a Home, next. State efile Dwelling Unit Used as a Home If you use a dwelling unit for both rental and personal purposes, the tax treatment of the rental expenses you figured earlier under Dividing Expenses and rental income depends on whether you are considered to be using the dwelling unit as a home. State efile You use a dwelling unit as a home during the tax 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. State efile See What is a day of personal use , later. State efile Fair rental price. State efile   A fair rental price for your property generally is the amount of rent that a person who is not related to you would be willing to pay. State efile The rent you charge is not a fair rental price if it is substantially less than the rents charged for other properties that are similar to your property in your area. State efile   If a dwelling unit is used for personal purposes on a day it is rented at a fair rental price, do not count that day as a day of rental use in applying (2) above. State efile Instead, count it as a day of personal use in applying both (1) and (2) above. State efile What is a day of personal use?   A day of personal use of a dwelling unit is any day that the unit is used by any of the following persons. State efile You or any other person who has an interest in the unit, unless you rent it to another owner as his or her main home under a shared equity financing agreement (defined later). State efile However, see Days used as a main home before or after renting , later. State efile A member of your family or a member of the family of any other person who owns an interest in the unit, unless the family member uses the dwelling unit as his or her main home and pays a fair rental price. State efile Family includes only your spouse, brothers and sisters, half-brothers and half-sisters, ancestors (parents, grandparents, etc. State efile ), and lineal descendants (children, grandchildren, etc. State efile ). State efile Anyone under an arrangement that lets you use some other dwelling unit. State efile Anyone at less than a fair rental price. State efile Main home. State efile   If the other person or member of the family in (1) or (2) above has more than one home, his or her main home is ordinarily the one he or she lived in most of the time. State efile Shared equity financing agreement. State efile   This is an agreement under which two or more persons acquire undivided interests for more than 50 years in an entire dwelling unit, including the land, and one or more of the co-owners is entitled to occupy the unit as his or her main home upon payment of rent to the other co-owner or owners. State efile Donation of use of property. State efile   You use a dwelling unit for personal purposes if: You donate the use of the unit to a charitable organization, The organization sells the use of the unit at a fund-raising event, and The “purchaser” uses the unit. State efile Examples. State efile   The following examples show how to determine days of personal use. State efile Example 1. State efile You and your neighbor are co-owners of a condominium at the beach. State efile Last year, you rented the unit to vacationers whenever possible. State efile The unit was not used as a main home by anyone. State efile Your neighbor used the unit for 2 weeks last year; you did not use it at all. State efile Because your neighbor has an interest in the unit, both of you are considered to have used the unit for personal purposes during those 2 weeks. State efile Example 2. State efile You and your neighbors are co-owners of a house under a shared equity financing agreement. State efile Your neighbors live in the house and pay you a fair rental price. State efile Even though your neighbors have an interest in the house, the days your neighbors live there are not counted as days of personal use by you. State efile This is because your neighbors rent the house as their main home under a shared equity financing agreement. State efile Example 3. State efile You own a rental property that you rent to your son. State efile Your son does not own any interest in this property. State efile He uses it as his main home and pays you a fair rental price. State efile Your son's use of the property is not personal use by you because your son is using it as his main home, he owns no interest in the property, and he is paying you a fair rental price. State efile Example 4. State efile You rent your beach house to Joshua. State efile Joshua rents his cabin in the mountains to you. State efile You each pay a fair rental price. State efile You are using your house for personal purposes on the days that Joshua uses it because your house is used by Joshua under an arrangement that allows you to use his house. State efile Days used for repairs and maintenance. State efile   Any day that you spend working substantially full time repairing and maintaining (not improving) your property is not counted as a day of personal use. State efile Do not count such a day as a day of personal use even if family members use the property for recreational purposes on the same day. State efile Days used as a main home before or after renting. State efile   For purposes of determining whether a dwelling unit was used as a home, you may not have to count days you used the property as your main home before or after renting it or offering it for rent as days of personal use. State efile Do not count them as days of personal use if: You rented or tried to rent the property for 12 or more consecutive months. State efile You rented or tried to rent the property for a period of less than 12 consecutive months and the period ended because you sold or exchanged the property. State efile However, this special rule does not apply when dividing expenses between rental and personal use. State efile Examples. State efile   The following examples show how to determine whether you used your rental property as a home. State efile Example 1. State efile You converted the basement of your home into an apartment with a bedroom, a bathroom, and a small kitchen. State efile You rented the basement apartment at a fair rental price to college students during the regular school year. State efile You rented to them on a 9-month lease (273 days). State efile You figured 10% of the total days rented to others at a fair rental price is 27 days. State efile During June (30 days), your brothers stayed with you and lived in the basement apartment rent free. State efile Your basement apartment was used as a home because you used it for personal purposes for 30 days. State efile Rent-free use by your brothers is considered personal use. State efile Your personal use (30 days) is more than the greater of 14 days or 10% of the total days it was rented (27 days). State efile Example 2. State efile You rented the guest bedroom in your home at a fair rental price during the local college's homecoming, commencement, and football weekends (a total of 27 days). State efile Your sister-in-law stayed in the room, rent free, for the last 3 weeks (21 days) in July. State efile You figured 10% of the total days rented to others at a fair rental price is 3 days. State efile The room was used as a home because you used it for personal purposes for 21 days. State efile That is more than the greater of 14 days or 10% of the 27 days it was rented (3 days). State efile Example 3. State efile You own a condominium apartment in a resort area. State efile You rented it at a fair rental price for a total of 170 days during the year. State efile For 12 of those days, the tenant was not able to use the apartment and allowed you to use it even though you did not refund any of the rent. State efile Your family actually used the apartment for 10 of those days. State efile Therefore, the apartment is treated as having been rented for 160 (170 − 10) days. State efile You figured 10% of the total days rented to others at a fair rental price is 16 days. State efile Your family also used the apartment for 7 other days during the year. State efile You used the apartment as a home because you used it for personal purposes for 17 days. State efile That is more than the greater of 14 days or 10% of the 160 days it was rented (16 days). State efile Minimal rental use. State efile   If you use the dwelling unit as a home and you rent it less than 15 days during the year, that period is not treated as rental activity. State efile See Used as a home but rented less than 15 days , later, for more information. State efile Limit on deductions. State efile   Renting a dwelling unit that is considered a home is not a passive activity. State efile Instead, if your rental expenses are more than your rental income, some or all of the excess expenses cannot be used to offset income from other sources. State efile The excess expenses that cannot be used to offset income from other sources are carried forward to the next year and treated as rental expenses for the same property. State efile Any expenses carried forward to the next year will be subject to any limits that apply for that year. State efile This limitation will apply to expenses carried forward to another year even if you do not use the property as your home for that subsequent year. State efile   To figure your deductible rental expenses for this year and any carryover to next year, use Worksheet 9-1. State efile Reporting Income and Deductions Property not used for personal purposes. State efile   If you do not use a dwelling unit for personal purposes, see How To Report Rental Income and Expenses , later, for how to report your rental income and expenses. State efile Property used for personal purposes. State efile   If you do use a dwelling unit for personal purposes, then how you report your rental income and expenses depends on whether you used the dwelling unit as a home. State efile Not used as a home. State efile   If you use a dwelling unit for personal purposes, but not as a home, report all the rental income in your income. State efile Since you used the dwelling unit for personal purposes, you must divide your expenses between the rental use and the personal use as described earlier in Dividing Expenses . State efile The expenses for personal use are not deductible as rental expenses. State efile   Your deductible rental expenses can be more than your gross rental income; however, see Limits on Rental Losses , later. State efile Used as a home but rented less than 15 days. State efile   If you use a dwelling unit as a home and you rent it less than 15 days during the year, its primary function is not considered to be rental and it should not be reported on Schedule E (Form 1040). State efile You are not required to report the rental income and rental expenses from this activity. State efile The expenses, including qualified mortgage interest, property taxes, and any qualified casualty loss will be reported as normally allowed on Schedule A (Form 1040). State efile See the Instructions for Schedule A (Form 1040) for more information on deducting these expenses. State efile Used as a home and rented 15 days or more. State efile   If you use a dwelling unit as a home and rent it 15 days or more during the year, include all your rental income in your income. State efile Since you used the dwelling unit for personal purposes, you must divide your expenses between the rental use and the personal use as described earlier in Dividing Expenses . State efile The expenses for personal use are not deductible as rental expenses. State efile   If you had a net profit from renting the dwelling unit for the year (that is, if your rental income is more than the total of your rental expenses, including depreciation), deduct all of your rental expenses. State efile You do not need to use Worksheet 9-1. State efile   However, if you had a net loss from renting the dwelling unit for the year, your deduction for certain rental expenses is limited. State efile To figure your deductible rental expenses and any carryover to next year, use Worksheet 9-1. State efile Depreciation You recover the cost of income-producing property through yearly tax deductions. State efile You do this by depreciating the property; that is, by deducting some of the cost each year on your tax return. State efile Three factors determine how much depreciation you can deduct each year: (1) your basis in the property, (2) the recovery period for the property, and (3) the depreciation method used. State efile You cannot simply deduct your mortgage or principal payments, or the cost of furniture, fixtures, and equipment, as an expense. State efile You can deduct depreciation only on the part of your property used for rental purposes. State efile Depreciation reduces your basis for figuring gain or loss on a later sale or exchange. State efile You may have to use Form 4562 to figure and report your depreciation. State efile See How To Report Rental Income and Expenses , later. State efile Alternative minimum tax (AMT). State efile    If you use accelerated depreciation, you may be subject to the AMT. State efile Accelerated depreciation allows you to deduct more depreciation earlier in the recovery period than you could deduct using a straight line method (same deduction each year). State efile Claiming the correct amount of depreciation. State efile   You should claim the correct amount of depreciation each tax year. State efile If you did not claim all the depreciation you were entitled to deduct, you must still reduce your basis in the property by the full amount of depreciation that you could have deducted. State efile   If you deducted an incorrect amount of depreciation for property in any year, you may be able to make a correction by filing Form 1040X, Amended U. State efile S Individual Income Tax Return. State efile If you are not allowed to make the correction on an amended return, you can change your accounting method to claim the correct amount of depreciation. State efile See Claiming the correct amount of depreciation in chapter 2 of Publication 527 for more information. State efile Changing your accounting method to deduct unclaimed depreciation. State efile   To change your accounting method, you generally must file Form 3115, Application for Change in Accounting Method, to get the consent of the IRS. State efile In some instances, that consent is automatic. State efile For more information, see chapter 1 of Publication 946. State efile Land. State efile   You cannot depreciate the cost of land because land generally does not wear out, become obsolete, or get used up. State efile The costs of clearing, grading, planting, and landscaping are usually all part of the cost of land and cannot be depreciated. State efile More information. State efile   See Publication 527 for more information about depreciating rental property and see Publication 946 for more information about depreciation. State efile Limits on Rental Losses If you have a loss from your rental real estate activity, two sets of rules may limit the amount of loss you can deduct. State efile You must consider these rules in the order shown below. State efile At-risk rules. State efile These rules are applied first if there is investment in your rental real estate activity for which you are not at risk. State efile This applies only if the real property was placed in service after 1986. State efile Passive activity limits. State efile Generally, rental real estate activities are considered passive activities and losses are not deductible unless you have income from other passive activities to offset them. State efile However, there are exceptions. State efile At-Risk Rules You may be subject to the at-risk rules if you have: A loss from an activity carried on as a trade or business or for the production of income, and Amounts invested in the activity for which you are not fully at risk. State efile Losses from holding real property (other than mineral property) placed in service before 1987 are not subject to the at-risk rules. State efile In most cases, any loss from an activity subject to the at-risk rules is allowed only to the extent of the total amount you have at risk in the activity at the end of the tax year. State efile You are considered at risk in an activity to the extent of cash and the adjusted basis of other property you contributed to the activity and certain amounts borrowed for use in the activity. State efile See Publication 925 for more information. State efile Passive Activity Limits In most cases, all rental real estate activities (except those of certain real estate professionals, discussed later) are passive activities. State efile For this purpose, a rental activity is an activity from which you receive income mainly for the use of tangible property, rather than for services. State efile Limits on passive activity deductions and credits. State efile    Deductions or losses from passive activities are limited. State efile You generally cannot offset income, other than passive income, with losses from passive activities. State efile Nor can you offset taxes on income, other than passive income, with credits resulting from passive activities. State efile Any excess loss or credit is carried forward to the next tax year. State efile   For a detailed discussion of these rules, see Publication 925. State efile    You may have to complete Form 8582 to figure the amount of any passive activity loss for the current tax year for all activities and the amount of the passive activity loss allowed on your tax return. State efile Real estate professionals. State efile   Rental activities in which you materially participated during the year are not passive activities if, for that year, you were a real estate professional. State efile For a detailed discussion of the requirements, see Publication 527. State efile For a detailed discussion of material participation, see Publication 925. State efile Exception for Personal Use of Dwelling Unit If you used the rental property as a home during the year, any income, deductions, gain, or loss allocable to such use shall not be taken into account for purposes of the passive activity loss limitation. State efile Instead, follow the rules explained in Personal Use of Dwelling Unit (Including Vacation Home), earlier. State efile Exception for Rental Real Estate Activities With Active Participation If you or your spouse actively participated in a passive rental real estate activity, you may be able to deduct up to $25,000 of loss from the activity from your nonpassive income. State efile This special allowance is an exception to the general rule disallowing losses in excess of income from passive activities. State efile Similarly, you may be able to offset credits from the activity against the tax on up to $25,000 of nonpassive income after taking into account any losses allowed under this exception. State efile Active participation. State efile   You actively participated in a rental real estate activity if you (and your spouse) owned at least 10% of the rental property and you made management decisions or arranged for others to provide services (such as repairs) in a significant and bona fide sense. State efile Management decisions that may count as active participation include approving new tenants, deciding on rental terms, approving expenditures, and similar decisions. State efile Maximum special allowance. State efile   The maximum special allowance is: $25,000 for single individuals and married individuals filing a joint return for the tax year, $12,500 for married individuals who file separate returns for the tax year and lived apart from their spouses at all times during the tax year, and $25,000 for a qualifying estate reduced by the special allowance for which the surviving spouse qualified. State efile   If your modified adjusted gross income (MAGI) is $100,000 or less ($50,000 or less if married filing separately), you can deduct your loss up to the amount specified above. State efile If your MAGI is more than $100,000 (more than $50,000 if married filing separately), your special allowance is limited to 50% of the difference between $150,000 ($75,000 if married filing separately) and your MAGI. State efile   Generally, if your MAGI is $150,000 or more ($75,000 or more if you are married filing separately), there is no special allowance. State efile More information. State efile   See Publication 925 for more information on the passive loss limits, including information on the treatment of unused disallowed passive losses and credits and the treatment of gains and losses realized on the disposition of a passive activity. State efile How To Report Rental Income and Expenses The basic form for reporting residential rental income and expenses is Schedule E (Form 1040). State efile However, do not use that schedule to report a not-for-profit activity. State efile See Not Rented for Profit, earlier. State efile Providing substantial services. State efile   If you provide substantial services that are primarily for your tenant's convenience, such as regular cleaning, changing linen, or maid service, report your rental income and expenses on Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business (Sole Proprietorship). State efile Substantial services do not include the furnishing of heat and light, cleaning of public areas, trash collection, etc. State efile For information, see Publication 334, Tax Guide for Small Business. State efile You also may have to pay self-employment tax on your rental income using Schedule SE (Form 1040), Self-Employment Tax. State efile   Use Form 1065, U. State efile S. State efile Return of Partnership Income, if your rental activity is a partnership (including a partnership with your spouse unless it is a qualified joint venture). State efile Qualified joint venture. State efile   If you and your spouse each materially participate as the only members of a jointly owned and operated real estate business, and you file a joint return for the tax year, you can make a joint election to be treated as a qualified joint venture instead of a partnership. State efile This election, in most cases, will not increase the total tax owed on the joint return, but it does give each of you credit for social security earnings on which retirement benefits are based and for Medicare coverage if your rental income is subject to self-employment tax. State efile For more information, see Publication 527. State efile Form 1098, Mortgage Interest Statement. State efile    If you paid $600 or more of mortgage interest on your rental property to any one person, you should receive a Form 1098, or similar statement showing the interest you paid for the year. State efile If you and at least one other person (other than your spouse if you file a joint return) were liable for, and paid interest on the mortgage, and the other person received the Form 1098, report your share of the interest on Schedule E (Form 1040), line 13. State efile Attach a statement to your return showing the name and address of the other person. State efile In the left margin of Schedule E, next to line 13, enter “See attached. State efile ” Schedule E (Form 1040) If you rent buildings, rooms, or apartments, and provide basic services such as heat and light, trash collection, etc. State efile , you normally report your rental income and expenses on Schedule E, Part I. State efile List your total income, expenses, and depreciation for each rental property. State efile Be sure to enter the number of fair rental and personal use days on line 2. State efile If you have more than three rental or royalty properties, complete and attach as many Schedules E as are needed to list the properties. State efile Complete lines 1 and 2 for each property. State efile However, fill in lines 23a through 26 on only one Schedule E. State efile On Schedule E, page 1, line 18, enter the depreciation you are claiming for each property. State efile To find out if you need to attach Form 4562, see Form 4562, in chapter 3 of Publication 527. State efile If you have a loss from your rental real estate activity, you also may need to complete one or both of the following forms. State efile Form 6198, At-Risk Limitations. State efile See At-Risk Rules , earlier. State efile Also see Publication 925. State efile Form 8582, Passive Activity Loss Limitations. State efile See Passive Activity Limits , earlier. State efile Page 2 of Schedule E is used to report income or loss from partnerships, S corporations, estates, trusts, and real estate mortgage investment conduits. State efile If you need to use page 2 of Schedule E, be sure to use page 2 of the same Schedule E you used to enter your rental activity on page 1. State efile Also, include the amount from line 26 (Part I) in the “Total income or (loss)” on line 41 (Part V). State efile Worksheet 9-1. State efile Worksheet for Figuring Rental Deductions for a Dwelling Unit Used as a Home Use this worksheet only if you answer “yes” to all of the following questions. State efile Did you use the dwelling unit as a home this year? (See Dwelling Unit Used as a Home . State efile ) Did you rent the dwelling unit at a fair rental price 15 days or more this year? Is the total of your rental expenses and depreciation more than your rental income? PART I. State efile Rental Use Percentage A. State efile Total days available for rent at fair rental price A. State efile       B. State efile Total days available for rent (line A) but not rented B. State efile       C. State efile Total days of rental use. State efile Subtract line B from line A C. State efile       D. State efile Total days of personal use (including days rented at less than fair rental price) D. State efile       E. State efile Total days of rental and personal use. State efile Add lines C and D E. State efile       F. State efile Percentage of expenses allowed for rental. State efile Divide line C by line E     F. State efile   PART II. State efile Allowable Rental Expenses 1. State efile Enter rents received 1. State efile   2a. State efile Enter the rental portion of deductible home mortgage interest and qualified mortgage insurance premiums (see instructions) 2a. State efile       b. State efile Enter the rental portion of real estate taxes b. State efile       c. State efile Enter the rental portion of deductible casualty and theft losses (see instructions) c. State efile       d. State efile Enter direct rental expenses (see instructions) d. State efile       e. State efile Fully deductible rental expenses. State efile Add lines 2a–2d. State efile Enter here and  on the appropriate lines on Schedule E (see instructions) 2e. State efile   3. State efile Subtract line 2e from line 1. State efile If zero or less, enter -0- 3. State efile   4a. State efile Enter the rental portion of expenses directly related to operating or maintaining  the dwelling unit (such as repairs, insurance, and utilities) 4a. State efile       b. State efile Enter the rental portion of excess mortgage interest and qualified mortgage insurance premiums (see instructions) b. State efile       c. State efile Carryover of operating expenses from 2012 worksheet c. State efile       d. State efile Add lines 4a–4c d. State efile       e. State efile Allowable expenses. State efile Enter the smaller of line 3 or line 4d (see instructions) 4e. State efile   5. State efile Subtract line 4e from line 3. State efile If zero or less, enter -0- 5. State efile   6a. State efile Enter the rental portion of excess casualty and theft losses (see instructions) 6a. State efile       b. State efile Enter the rental portion of depreciation of the dwelling unit b. State efile       c. State efile Carryover of excess casualty losses and depreciation from 2012 worksheet c. State efile       d. State efile Add lines 6a–6c d. State efile       e. State efile Allowable excess casualty and theft losses and depreciation. State efile Enter the smaller of  line 5 or line 6d (see instructions) 6e. State efile   PART III. State efile Carryover of Unallowed Expenses to Next Year 7a. State efile Operating expenses to be carried over to next year. State efile Subtract line 4e from line 4d 7a. State efile   b. State efile Excess casualty and theft losses and depreciation to be carried over to next year. State efile  Subtract line 6e from line 6d b. State efile   Worksheet 9-1 Instructions. State efile Worksheet for Figuring Rental Deductions for a Dwelling Unit Used as a Home Caution. State efile Use the percentage determined in Part I, line F, to figure the rental portions to enter on lines 2a–2c, 4a–4b, and 6a–6b of  Part II. State efile Line 2a. State efile Figure the mortgage interest on the dwelling unit that you could deduct on Schedule A as if you had not rented the unit. State efile Do not include interest on a loan that did not benefit the dwelling unit. State efile For example, do not include interest on a home equity loan used to pay off credit cards or other personal loans, buy a car, or pay college tuition. State efile Include interest on a loan used to buy, build, or improve the dwelling unit, or to refinance such a loan. State efile Include the rental portion of this interest in the total you enter on line 2a of the worksheet. State efile   Figure the qualified mortgage insurance premiums on the dwelling unit that you could deduct on line 13 of Schedule A as if you had not rented the unit. State efile See the Schedule A instructions. State efile However, figure your adjusted gross income (Form 1040, line 38) without your rental income and expenses from the dwelling unit. State efile See Line 4b to deduct the part of the qualified mortgage insurance premiums not allowed because of the adjusted gross income limit. State efile Include the rental portion of the amount from Schedule A, line 13, in the total you enter on line 2a of the worksheet. State efile   Note. State efile Do not file this Schedule A or use it to figure the amount to deduct on line 13 of that schedule. State efile Instead, figure the personal portion on a separate Schedule A. State efile If you have deducted mortgage interest or qualified mortgage insurance premiums on the dwelling unit on other forms, such as Schedule C or F, remember to reduce your Schedule A deduction by that amount. State efile           Line 2c. State efile Figure the casualty and theft losses related to the dwelling unit that you could deduct on Schedule A as if you had not rented the dwelling unit. State efile To do this, complete Section A of Form 4684, Casualties and Thefts, treating the losses as personal losses. State efile If any of the loss is due to a federally declared disaster, see the Instructions for Form 4684. State efile On Form 4684, line 17, enter 10% of your adjusted gross income figured without your rental income and expenses from the dwelling unit. State efile Enter the rental portion of the result from Form 4684, line 18, on line 2c of this worksheet. State efile   Note. State efile Do not file this Form 4684 or use it to figure your personal losses on Schedule A. State efile Instead, figure the personal portion on a separate Form 4684. State efile           Line 2d. State efile Enter the total of your rental expenses that are directly related only to the rental activity. State efile These include interest on loans used for rental activities other than to buy, build, or improve the dwelling unit. State efile Also include rental agency fees, advertising, office supplies, and depreciation on office equipment used in your rental activity. State efile           Line 2e. State efile You can deduct the amounts on lines 2a, 2b, 2c, and 2d as rental expenses on Schedule E even if your rental expenses are more than your rental income. State efile Enter the amounts on lines 2a, 2b, 2c, and 2d on the appropriate lines of Schedule E. State efile           Line 4b. State efile On line 2a, you entered the rental portion of the mortgage interest and qualified mortgage insurance premiums you could deduct on Schedule A if you had not rented the dwelling unit. State efile If you had additional mortgage interest and qualified mortgage insurance premiums that would not be deductible on Schedule A because of limits imposed on them, enter on line 4b of this worksheet the rental portion of those excess amounts. State efile Do not include interest on a loan that did not benefit the dwelling unit (as explained in the line 2a instructions). State efile           Line 4e. State efile You can deduct the amounts on lines 4a, 4b, and 4c as rental expenses on Schedule E only to the extent they are not more than the amount on line 4e. State efile *           Line 6a. State efile To find the rental portion of excess casualty and theft losses, use the Form 4684 you prepared for line 2c of this worksheet. State efile   A. State efile Enter the amount from Form 4684, line 10       B. State efile Enter the rental portion of line A       C. State efile Enter the amount from line 2c of this worksheet       D. State efile Subtract line C from line B. State efile Enter the result here and on line 6a of this worksheet               Line 6e. State efile You can deduct the amounts on lines 6a, 6b, and 6c as rental expenses on Schedule E only to the extent they are not more than the amount on line 6e. State efile * *Allocating the limited deduction. State efile If you cannot deduct all of the amount on line 4d or 6d this year, you can allocate the allowable deduction in any way you wish among the expenses included on line 4d or 6d. State efile Enter the amount you allocate to each expense on the appropriate line of Schedule E, Part I. State efile Prev  Up  Next   Home   More Online Publications