U.S. rental property: how it is reported

Renting out a U.S. property creates obligations even if the rent barely covers expenses. How it is reported depends on whether you are a tax resident.

If you are a tax resident

Rent is reported on Schedule E of Form 1040. You subtract expenses: mortgage interest, property tax, insurance, management, repairs and depreciation of the building, which for residential property is spread over 27.5 years. Land is not depreciated.

If you are a nonresident

As a general rule, a nonresident pays 30% of gross rent, with no expenses deducted, and the tenant or manager must withhold it. In most cases it is better to make the election to treat the rent as income from a U.S. business. With it you are taxed on net income, you deduct expenses and depreciation, and you file Form 1040-NR. To stop the manager from withholding 30%, you give them Form W-8ECI.

Depreciation is not optional

When you sell, the IRS computes the gain by subtracting the depreciation that was allowable, whether or not you deducted it. That is why it pays to take it every year.

Short-term rentals in Florida

If you rent for six months or less, for example through vacation rental platforms, you must collect and pay Florida sales tax and the county tourist tax, unless the platform does it for you. Confirm this before the first booking.