Schedule E for Small Landlords

Rental income is reported on Schedule E of Form 1040. You deduct operating expenses (repairs, insurance, taxes, utilities, management fees), interest, and depreciation of the building (27.5 years, straight line).

Repairs are deductible in the year incurred; improvements are capitalized and depreciated. The de minimis safe harbor lets you expense items under $2,500 per invoice.

Passive activity loss rules can defer deductions above rental income unless you qualify as a real estate professional or meet the $25,000 active-participation exception.