Home Rental Tax Question?

Here鈥檚 my situation. I鈥檓 getting ready to buy a house for a great deal in all cash. I may not end up living in it for a year so I might rent it out.





How do you pay taxes on rental income? Lets say I charge 700 a month I assume I would get to deduct home insurance and property taxes approx 150 a month. Do I have to pay taxes on the full 550 of income left? It seems unfair in a sense that I pay on the full amount. It鈥檚 like I鈥檓 getting punished because I paid in full cash.





Also How do you report it at the end of the year to the IRS? I image you just keep receipts and turn them in?





ThanksHome Rental Tax Question?
You are not being punished for paying cash. When a person borrows money to buy a rental property, they do not get to deduct the principal portion of their payment. They do get to deduct the interest they pay, but you are ahead of them in the game...you aren't paying interest.





You deduct the property itself as depreciation. For residential rental property, the depreciation is spread out over a period of 27.5 years. So you do get to deduct the amount you pay for the property, just not all in one year. :)





You can also deduct any repairs, or other expenses related to having a rental property.





The rental income and expenses are reported on Schedule E.


Go to IRS website (irs . gov with no spaces) and type ';rental property'; in the search box. The first top that comes up is Topic 414, and you should find it helpful.