You can rent out all or part of your home or apartment for up to 14 days per year and all the rental income you receive is tax-free, no matter how much you earn. In fact you don't even have to report the income to the IRS. Your rental income is tax free if, during the year:
you rent out your home for 14 days or less), and
the home is used personally for more than 14 days, or more than 10% of the total days it is rented to others at a fair rental price. However unless you are in this situation, then you need to report your rent as your income; If you rent your main residence over 14 days during the year, and live in it 15 days or more, you won?t qualify for the tax-free treatment described above. Instead, you?ll have to report and pay income tax on your rental income by filing IRS Sch E along with your tax return. But you?ll also be allowed to deduct your rental-related expenses, within very strict limits.
You need to list your rental income and expenses on Sch E. You must pay income tax on any profit left over after you deduct your rental expenses from your rental income. However, your annual rental deductions are limited to your rental income from the home. If your expenses exceed your income, you may not deduct the loss from other income you earn that year. Such a loss can be carried forward to future years and deducted from your rental income from the property, if you have enough. You are allowed to deduct your expenses from your rental income, but there are strict limitations designed to ensure that you don?t deduct personal expenses as rental expenses. You are allowed to deduct 100% of your direct rental expenses. These are expenses that apply only to renting, such as fees or commissions you pay to the rental agency, advertising, credit checks, insurance for the rental, cleaning costs, repairs solely for the rental portion of your home, and depreciation (limited to the rental portion of the home).