- 1). Count the number of days you used the property for personal use and the number of days you rented it throughout the year. For example, if you own a vacation rental property and use it for a personal two-week vacation, then you used the property for 14 days. Do not report any income if you rent the property less than 15 days. Report only the income and expense related to the number of days rented if you used the property for more than 14 days or for more than 10 percent of the days it was rented.
- 2). Record the income you receive from all rental properties rented more than 15 days on line 3 Schedule E of Form 1040. Include all payments of advanced rent, repair or maintenance expenses paid by tenants and payments to cancel a lease in the current tax year.
- 3). Report all deductible expenses on lines 5 through 17 of Schedule E. Include all expenses you incur throughout the year for advertising, repairs and maintenance, legal fees, taxes, management, travel, interest, mortgage interest, depreciation, utilities, insurance and rental payments. Record depreciation on line 20.
- 4). Add together all the expenses from the rental property and subtract them from the income you are claiming to figure out your net income, or losses, from the rental property. Report this on line 26 of Schedule E.
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