Rental Personal income types

Rental income is money you receive for the:

  • Occupancy of real estate
  • Use of personal property

Income can be:

  • Amounts received from tenants for the monthly rent of property
  • Payments by a tenant for cancellation of a lease

You must pay tax on any profit from renting out property.

Rental expenses

All ordinary and necessary expenses paid or incurred during the tax year in maintaining the rental property are allowed as a deduction.

Federal return

Report your rental income and expenses on Part I, Income or Loss From Rental Real Estate Royalties on Supplemental Income and Loss, Schedule E (IRS Form 1040).

Visit IRS’s Tips on Rental Real Estate Income, Deductions and Recordkeeping for more information.

California return

Your rental income after expenses will be included in your adjusted gross income once you file your federal return.

Residents

Residents are taxed on all rental income regardless of where the property is located.

Nonresidents

Nonresidents are taxed only on rental income from property located in California.

If you're a nonresident, include your net income or loss on California Adjustments — Nonresidents or Part-Year Residents (Schedule CA 540NR).

Visit Instructions for Schedule CA (540NR) for more information.