Rental Income: Rental Income & Expenses
Quick answer
Rental income and operating expenses are reported on Schedule E, and residential rental property is depreciated rather than expensed. Repairs are deductible; improvements are capitalized. Personal use of the unit can limit deductions, and rental losses are generally passive under IRC Section 469, with an active-participation allowance that phases out as income rises.
Rental Income & Expenses is tested on EA Exam Part 1 (Income & Assets). Primary IRS reference: IRS Publication 527.
Last updated
Cite or share this
About this EA exam topic
Rental-income questions test income recognition, deductible expenses, depreciation of the property, and the loss-limitation rules. The EA exam separates ordinary rental activity from personal-use (vacation home) situations, which limit deductions.
The passive-activity loss rules and the special allowance for active rental participation are frequently tested. Expect a fact pattern with mixed personal/rental use or a loss the taxpayer wants to deduct.
What you'll be tested on
- Reporting rental income and deductible operating expenses on Schedule E
- Depreciation of residential rental property
- Personal-use/vacation-home limits on deductions
- Passive-activity loss limits and the active-participation special allowance
How to prepare
- Know the personal-use day thresholds that reclassify a property.
- Remember the special-allowance phase-out for active participants.
- Separate repairs (deductible) from improvements (capitalized).
Practice questions for Rental Income & Expenses
What this topic covers
Rental Income & Expenses appears in Part 1: Individual Taxation within the Income & Assets domain. VantageEA practice questions focus on how rental income rules are applied in realistic EA exam fact patterns.
What candidates practice
Candidates practice identifying tested facts, choosing the best multiple-choice answer, and reviewing explanations tied to IRS Publication 527, Schedule E, IRC §469. This topic supports timed 100-question PSI-style mock tests and shorter topic review sessions.
Related practice-question themes include rental-income, schedule-e, passive-activity, depreciation.
Topic overview
Official IRS sources
Related keywords
Frequently asked questions
Are rental losses deductible?
Usually limited by passive-activity rules, with a special allowance for active participants subject to an income phase-out.
Which part?
Part 1 (Individuals).
Reference?
IRS Publications 527 and 925.
Continue studying
More Income & Assets topics from Part 1
Capital Gains: Capital Gains & Sale of Residence
Income & Assets
Interest & Dividends: Interest & Dividend Income
Income & Assets
Other Income: SS Benefits, Alimony, Other Income
Income & Assets
Retirement Income: IRA/Pension Distributions
Income & Assets
Wages & Compensation: W-2 Income & Fringe Benefits
Income & Assets
AMT & NIIT: AMT & Net Investment Income Tax
Taxation & Advice
Practice this topic.
Start free.
Try the EA exam free: practice questions, no login
PSI-style questions with instant scoring and IRS-referenced explanations. Free to use, with no credit card or account.