Is this correct regarding taxes and rental property income?

Hey guys, I'm super confused about how to handle the taxes for my rental property. I bought a small house last year that I've been renting out since August. The tenant pays $1,450 monthly. I've been tracking expenses like the mortgage ($1,100/month), property taxes (about $2,200 annually), and some repairs I had to make after a small water leak ($750). My tax software is asking about "passive activity" and depreciation, and I'm not sure if I'm doing this right. I know I can deduct expenses, but do I also need to calculate depreciation? And how do I handle the fact that I only rented it for part of the year? Someone told me I need to file a Schedule E, but I'm worried I'll mess something up and get audited. Also, am I allowed to deduct the miles I drive to check on the property every month? It's about 40 miles round trip from my home.

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18 comments

Zoe Alexopoulos

•8M

Yes, rental income is considered passive activity and you definitely need to report it on Schedule E. Here's what you need to know: For the partial year rental, you'll only report the income and expenses for the months it was actually rented (August-December). So you'd report roughly 5 months of rental income, and the corresponding portion of your annual expenses. Depreciation is not optional - the IRS requires you to depreciate residential rental property over 27.5 years. You'll need to separate the value of the land (which isn't depreciable) from the building value. Your county property tax assessment might help with this breakdown. Miles driven to manage your rental are absolutely deductible! Keep a log with dates, mileage, and purpose of trips. For 2024 taxes (filing in 2025), the standard mileage rate is 67 cents per mile for business purposes, including rental property management. Don't forget other potential deductions: insurance, HOA fees, cleaning between tenants, lawn care, advertising costs, and even a portion of your cell phone bill if you use it to communicate with tenants.

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Zoe Alexopoulos

•8M

You don't need an official appraisal specifically for tax purposes. Your property tax assessment should have a breakdown somewhere, even if the bill shows just one amount. Check the detailed assessment or call your county assessor's office - they typically separate land and improvements. If you can't find this, a reasonable estimate is fine - many use an 80/20 split (80% building, 20% land) in typical residential areas, but this varies by location. Most regular repairs can be deducted fully in the year you pay them. However, major improvements that add value to the property or extend its life (like a new roof, addition, or complete kitchen renovation) must be capitalized and depreciated over time. That $750 water leak repair sounds like a standard repair that would be fully deductible in the current year.

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Mei Liu

•8M

I was in the same situation last year with my first rental property and was super confused! I tried using TurboTax but kept second-guessing myself with all those rental property questions. I finally used https://taxr.ai to upload my rental documents and tax forms. It analyzed everything and gave me a detailed breakdown of exactly what I could deduct, how to calculate my depreciation correctly, and even found some deductions I had missed (like mortgage interest and a portion of my insurance). The best part was that it explained everything in simple terms and gave me confidence that I wasn't making mistakes. It helped me organize all my rental income and expenses properly for Schedule E and showed me exactly where everything should go.

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Mei Liu

•8M

Yes, it handles multiple properties really well! You can upload documents for each property separately, and it organizes everything by property address. It creates individual profit/loss statements for each property while still combining everything correctly for your tax forms. For depreciation calculations, that's actually where it really shines. You just enter your purchase price and date, and it guides you through allocating between land and building. It even explains the whole 27.5 year schedule and shows you exactly what to claim each year, including calculating the correct amount for partial years when you first start renting the property.

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Amara Nwosu

•8M

Just wanted to update after trying https://taxr.ai for my rental property taxes. I was really struggling with figuring out the depreciation for my duplex, especially since I converted it from my primary residence to a rental last year. The system actually guided me through the whole process step by step! It helped me determine the correct basis for depreciation (using the lower of fair market value or adjusted basis when converting from personal to rental), calculated my allowable depreciation correctly for a mid-year conversion, and organized all my expenses by category. I was surprised how much more I could deduct than I realized - even things like my mortgage points that I thought I couldn't claim. Definitely made Schedule E way less intimidating!

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AstroExplorer

•8M

If you're having trouble getting answers about your rental property tax questions from the IRS, I totally feel your pain. I spent WEEKS trying to get through to someone about my rental depreciation recapture question last tax season. After multiple failed attempts, I found https://claimyr.com and watched their demo video at https://youtu.be/_kiP6q8DX5c. They got me connected to an actual IRS agent within about 20 minutes when I'd been trying for days on my own. The agent walked me through exactly how to handle my rental property depreciation and confirmed I was doing the passive activity limitation calculations correctly. Saved me a ton of stress and potentially an audit!

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AstroExplorer

•8M

It works by using an automated system that continually calls the IRS and navigates through their phone tree until it gets a place in line, then it calls you and connects you. It's basically doing the waiting for you instead of you having to sit on hold for hours. It's completely legitimate - they're not doing anything special that you couldn't do yourself if you had the time and patience to keep calling back and waiting on hold. The difference is their system can do this automatically without tying up your phone or requiring you to actively wait.

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Fatima Al-Farsi

•8M

Well I'm eating my words now. After expressing skepticism about Claimyr, I was still desperate enough to try it because I had a complex question about depreciation recapture on my rental property I sold last year. I was honestly shocked when I got a call back with an actual IRS agent on the line about 25 minutes later. The agent spent almost 30 minutes walking me through exactly how to report the sale on my tax return, including how to handle the depreciation I had claimed over the years. This literally saved me thousands in potential mistakes. I was about to incorrectly report the capital gains portion. Would never have figured this out without talking to an actual agent, and would never have reached one without this service.

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Dylan Cooper

•8M

Vacation rentals absolutely have different tax implications! Short-term rentals (typically less than 30 days) are often subject to lodging taxes that long-term rentals aren't. You may need to collect and remit occupancy taxes similar to hotels. The bigger difference comes with how you report income and expenses. With significant personal use, you might need to allocate expenses between personal and rental use based on days. Also, if you actively manage a short-term rental with average stays under 7 days, it might be considered "active" rather than "passive" income, which affects how losses can be deducted. Some short-term rental owners even qualify as "real estate professionals" which opens up additional tax benefits.

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