Rental Income

• If you rent out property to others, you must report this income to the IRS on your tax return. IRS rules require you to report all the rental income received receive each year, including any advance rent you receive, such as in cases where you demand "first and last" month's rent. You do not have to report a security deposit as income.
  
  

Deductions

• As a landlord, you can deduct many of the expenses related to the rental property. Repairs, the cost of hiring contractors, home improvement loan interes and business travel are some of the deductions you are allowed. You can also factor property depreciation into your annual deductions.
  
  

Short-Term Rentals

• If you rent out a property for 14 days or less in a year, you do not have to pay taxes on that income, no matter how much it is. However, if you rent the property for more than two weeks annually, you must report that income to the IRS. If the home you rent out is a vacation home that you use personally and rent to others, talk to a tax professional about how to sort out your "landlord" expenses from any deductions you can take as a homeowner.
  
  

Consequences of Not Paying Taxes

• While it can be tempting not to report landlord income, particularly if you just rent out one or two apartments, this is a risky practice. If the IRS finds out about your extra income, the agency may come after you for back taxes and penalties, which could cost you a lot of money.