Question

Bill rents his house out for 21 days during the year, and lives in it for 7 days during the year. The rent for the 21 days is $10,000. He has no mortgage, but does have property taxes of $1,200 for the whole year. The utilities and maintenance for the year is $6,000. Depreciation for the entire year would be $5,000. How much income or loss will he have to include on his 2015 tax return?

Answer 1

We generally must include in your gross income all amounts you receive as rent. Rental income is any payment you receive for the use or occupation of property. We must report rental income for all your properties.

If we receive rental income from the rental of a dwelling unit, there are certain rental expenses you may deduct on your tax return. These expenses may include mortgage interest, property tax, operating expenses, depreciation, and repairs.

We can deduct the ordinary and necessary expenses for managing, conserving and maintaining the rental property. Ordinary expenses are those that are common and generally accepted in the business. Necessary expenses are those that are deemed appropriate, such as interest, taxes, advertising, maintenance, utilities and insurance and we can deduct the costs of certain materials, supplies, repairs, and maintenance that you make to your rental property to keep your property in good operating condition.

Therefore, Property tax of $ 1200, Utilities and maintenance exp of $ 6000 and Depreciation of $ 5000 from the Rental Income

Rental Income = $ 10000 less above deductions $ 12200

There is a rental loss (Net operating loss) = $ 2200

Thanks and regards