Rental Income (Taxes)

[mossman]

I have some questions regarding rental income and how much to put on my Schedule E. I have been getting my taxes prepared by a professional the past few years and he has always indicated that rental income is any money that the tenants give me, regardless if most of that money goes towards the mortgage. I just wanted to be sure that this is correct. I was hoping that I only had to report any profit (money left over after paying mortgage) I had earned for that year. I understand that I get to deduct taxes, interest, expenses and depreciation from the rental income, but this hardly puts a dent in the income figure. In fact, I would have to drastically reduce the amount I charge for rent for the other deductions and depreciation to cancel out the income. For example, I charge $1460 per month x 12 months = $17,520, subtract taxes, insurance, and depreciation and I'm still left with over $9,000. So to avoid paying taxes on this income, I would have to lower the monthly rent by $750, which would be insane and I would lose about $300 per month.

[HeresJohnny]

You need to report the total rent collected of $17,520 on schedule E. You can deduct as expenses against the rent, real estate taxes, insurance, repairs and maintenance, mortgage interest, depreciation, utilities, and any other expenses that you paid on the rental unit. You pay taxes on the net income left over. While you may have to pay some tax, you are still left with some cash after paying the tax, so why would you want to lower the rent?