Reporting rental income to the IRS: Everything you need to know — FIbyREI

How Is Rental Income Taxed?

Rental income is taxed as ordinary income . With that, the amount you owe in taxes will depend on the marginal tax bracket that you fall into.

What happens if you don’t report rental income?

If you don’t report rental income to the IRS, you’ll be committing tax fraud.

How can I avoid paying tax on rental income?

In most cases, you cannot avoid paying taxes on your rental income. However, there are some unique cases in which the IRS doesn’t expect you to report your rental income.

How does the IRS catch unreported rental income?

You might be wondering how the IRS can catch unreported rental income. After all, how could they know what you’ve earned in rental income unless you report it?

Can I be reported for not claiming rental income?

Yes, you can be reported for not claiming rental income. If you aren’t reporting your rental income, then the IRS will likely find out at some point.

Should you report rental income on taxes?

In the end, the best way to avoid any tax issues is to report any rental income to the IRS. You don’t want to deal with an arduous tax audit or pay penalties for your choices. Plus, you could get caught in a situation in which you cannot afford to pay the penalties right away and find yourself with tax debt.

The bottom line

If you don’t report rental income, the consequences can be severe. You will be facing penalties levied by the IRS that could add up to a major expense. Additionally, you will hurt your own chances of securing funding for future properties because lenders rely on your tax returns to verify your income. With a lower reported income, you might not qualify for the loan you were hoping for.



Host of “The House Hacking Podcast” and owner of

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Andrew Kerr

Andrew Kerr

Host of “The House Hacking Podcast” and owner of