Adding rental property income

Schedule E Basics

If you own rental property, your rental income and expenses are reported on Schedule E of your tax return. This is separate from self-employment income (which goes on Schedule C). The good news? Rental income generally isn't subject to self-employment tax.

Schedule E covers:

• Residential rental properties (houses, apartments, condos)
• Commercial rental properties
• Vacation rentals (with some special rules)

Reporting Rental Income

You'll need to report all rental income you received during the year, including:

• **Regular rent payments** from tenants
• **Advance rent** — any rent paid for future months
• **Security deposits** kept (if you kept part or all of a deposit as final payment or for damages)
• **Lease cancellation fees** paid by a tenant
• **Tenant-paid expenses** — if a tenant pays utilities or other expenses that are your obligation

What If You Had a Vacancy?

You only report income you actually received. If the property was vacant for part of the year, you don't need to report theoretical rent for those months. However, you can still deduct expenses during the vacancy as long as the property was available for rent.

Common Rental Deductions

One of the biggest benefits of rental property is the ability to deduct expenses. Common deductions include:

• **Mortgage interest** — the interest portion of your mortgage payments
• **Property taxes** — real estate taxes on the rental property
• **Insurance** — homeowner's insurance, landlord insurance, umbrella policies
• **Repairs and maintenance** — fixing a leaky faucet, repainting, replacing a broken window
• **Depreciation** — a yearly deduction that accounts for the property's wear and tear over time (residential property is depreciated over 27.5 years)
• **Property management fees** — if you use a property manager
• **Utilities** — if you pay water, electricity, gas, or trash for the property
• **Advertising** — costs to find tenants (listing fees, signage)
• **Travel** — mileage to and from the property for maintenance or management

Repairs vs. Improvements

This is an important distinction:

• **Repairs** (fixing what's broken) are deducted in full in the current year
• **Improvements** (adding value or extending the life) must be depreciated over time

For example, fixing a broken pipe is a repair. Remodeling the entire bathroom is an improvement.

How to Enter Rental Income in FileJoy

Step 1: Add a Rental Property

From your dashboard, go to Income and select Rental income. Click Add Rental Property.

Step 2: Enter Property Details

Fill in the basics:

• Property address
• Property type (single family, multi-unit, condo, etc.)
• Date placed in service
• Your ownership percentage (if co-owned)
• Number of days rented vs. personal use

Step 3: Enter Income

Add all rental income received during the year. If you have a property manager who provides an annual statement, you can upload it and FileJoy will extract the numbers.

Step 4: Enter Expenses

Go through each expense category and enter your amounts. Keep receipts and records in case of an audit.

Step 5: Review and Save

FileJoy will calculate your net rental income (or loss) and place it on Schedule E. Review the summary to make sure everything looks correct.

Tips

• Keep detailed records of all income and expenses for each property
• Take photos of repairs and improvements for documentation
• If your rental shows a loss, there are income limits on how much you can deduct (the $25,000 passive activity loss allowance phases out at higher incomes)
• Consider uploading your mortgage statement and property tax bill for easy reference