Salaried workers who take on a side rental property can earn additional income, yet they must handle new tax obligations. The following guide breaks down what you need to know to stay compliant, minimize liability, and make the most of available deductions.

INTRODUCTION

If you earn a regular paycheck and also own a rental property, the IRS considers the rental income passive. Even if you’re not a full‑time landlord, the same rules for all renters apply to you. Knowing these rules in advance can prevent surprises on your return.

TAXABLE INCOME FROM RENTALS

1. Gross Rental Earnings – Combine all rent received in the year. Include any security deposits that are actually returned to tenants.
   
   
2. Extra Income – Charges for parking, laundry, or other services are taxable.
   
   
3. Reporting – Schedule E (Supplemental Income and Loss) is where you report rental income and expenses, then attach it to Form 1040.
   
   

DEDUCTIBLE EXPENSES

You can subtract ordinary and 確定申告 節税方法 問い合わせ necessary expenses from your gross rental income. Common deductions include:

• Mortgage interest plus property taxes
  
• Rental property insurance premiums
  
• Repairs but not improvements
  
• Utilities you pay on behalf of tenants
  
• Professional services—accounting, legal, property management
  
• Depreciation of the building (not the land)
  
• Advertising for tenants, moving costs, and office supplies used for rental work
  
  

Depreciation is calculated using the Modified Accelerated Cost Recovery System (MACRS). For residential property, the recovery period is 27.5 years. You can use the IRS depreciation tables or a spreadsheet to keep track.

Depreciation is calculated using the Modified Accelerated Cost Recovery System (MACRS). For residential property, the recovery period is 27.5 years. You can use IRS depreciation tables or a spreadsheet to monitor it.

SPECIAL RULES FOR SALARIED WORKERS

Because payroll tax withholding is already in place, the IRS won’t double‑tax your rental income. However, you must still pay self‑employment tax if your rental activity is considered a trade or business. In most cases, residential rentals are treated as passive, so the 15.3% self‑employment tax does not apply. If you actively manage the rental—frequent repairs, showing the property, or offering major services—the IRS may treat it as a business, triggering self‑employment tax.

CONSOLIDATED DEDUCTIONS

Should your rental loss be less than $25,000 and you file jointly, you could offset up to $25,000 of ordinary income if you satisfy the "active participation" test. Once your adjusted gross income exceeds $100,000, the deduction phases out. Salaried workers need to keep an eye on their AGI to see if they qualify for the benefit.

STATE AND LOCAL TAXES

Many states tax rental income like the federal government does, but some add extra requirements:

• California: Must file a real property tax return (Form 593) when owning a rental in California
  
• New York: Requires a separate filing for rental income, and may impose an additional local tax in certain jurisdictions
  
  

Consult your state tax agency for specific deadlines and forms.

RECORD KEEPING BEST PRACTICES

• Use a separate bank account for rental income and expenses
  
• Store receipts, invoices, and statements electronically
  
• Track mileage when driving to the property for repairs or tenant meetings
  
• Maintain a calendar of major repairs and improvements to aid depreciation calculations
  
  

FILING TIPS

1. E‑file – Most taxpayers file electronically, which speeds up processing and reduces errors.
   
   
2. Schedule E – Verify that income and expenses balance.
   
   
3. Tax Software – Many programs feature a "Rental Property" module that automates depreciation and expense tracking.
   
   
4. Professional Advice – For significant rental income or uncertainty about passive loss limits, consult a CPA who specializes in real estate taxes.
   
   

COMMON PITFALLS

• Mixing Personal and Rental Expenses – Personal utilities or mortgage payments must be apportioned if they serve both personal and rental purposes.
  
  
• Improvement vs. Repair – A new bathroom addition is an improvement and should be depreciated, not deducted immediately.
  
  
• Unreported Security Deposits – Holding a security deposit that is not returned counts as income.
  
  
• Failure to File Schedule E – Omitting this form may trigger penalties and IRS scrutiny.
  
  

CONCLUSION

Side rentals may boost a salaried worker’s income, yet they carry tax duties distinct from your regular paycheck. Accurate reporting, legitimate deductions, and organization help keep tax liability low and avoid costly mistakes. Maintain tidy records, watch passive loss limits, and, if uncertain, seek professional advice to keep your side rental profitable and compliant.