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Many people rent out homes or apartments to supplement their income, or they start a business in property investment full time. If you have rental property that you make any income from, you are required by the IRS to pay rental property tax on any income this property generates.

Typically, a rental property is a single or multi-family dwelling, but depending on where you live, these types of accommodations may also be required to pay rental property tax:

  • Mobile homes
  • Trailers
  • Apartments
  • Bungalows
  • Hotels
  • Motels

Deducting Expenses

You will, naturally, have expenses in the upkeep and maintenance of any investment property. This might include cleaning the home in between tenants, repairing the roof, installing new carpet, or even advertising the home as being for rent.

On your taxes, you can deduct these expenses related to your rental property from your gross rental income in the year you pay rental property tax on the investment. Check with your city’s business licenses, permits & tax to find out what expenses are tax deductible if you’re not sure.

Paying Your Rental Property Tax

Some cities charge a flat rate based on the number of properties you rent out. An apartment buildings with 10 apartments in it would be charged 10 times whatever the flat fee would be. Others charge a percent of the rental property income you collected in a year.

There are exceptions to business owners who must pay rental property tax. If your property has not been inhabited, you may be able to file an exemption application. If you own a second home as a vacation property and do not rent it out at all, you will be exempt from rental property tax.

If the home is occupied by a nonprofit or family member, or is owned by a family trust, you may also be exempt from the tax.