Rental income is one of the more complex tax entries for many taxpayers.
There are different aspects of the income and related expenses that one needs to consider when filing tax returns.
Below are some of the rules that apply to rent income:

• General Rule - The general rule that applies to rental income is that all such incomes are taxable and need to be reported on the Schedule E under "Rental Income".
  This income is included in ones Adjusted Gross Income (AGI) and a tax rate is applied according to the taxpayer's tax bracket.
  
• Deductible Expenses - A taxpayer who reports rental property income is also allowed to deduct rental related expenses against the rental income.
  These deductible expenses include repairs and maintenance costs, depreciation of building and fittings such as furniture, utilities, property taxes, and mortgage interest.
  These expenses are listed on Schedule E against the rental income.
  You will need to keep proper records to prove the expenses listed at the Schedule E.
  Rental income is a red-flag item for the IRS and you need to ensure that all your transactions are above board.
  
• Short Stay Rental - If you rent out your home for a period of 14 days or less in a year, you do not need to report the income and the income is completely tax free.
  However, such short stay rental income can only occur once a year to be tax free.
  This rent type is common in areas near a sports tournament venue, political convention, religious conferences, trade symposiums and such like short duration events.
  If a taxpayer receives such tax-free income, he or she cannot claim rental expenses under Schedule E.
  However, he or she may deduct property taxes and mortgage interest under Schedule A.
  
• Mixed Rental - Individuals who rent out their homes for more than 14 days will need to report such incomes.
  Taxation becomes complex when the owner uses the property for some part of the year and then rents it out or when the owner rents out only part of the property and uses the rest.
  In such cases, the taxpayer will need to calculate the percentage of use for personal and for rental purposes and apportion the expenses according to such percentage use.
  He or she can then deduct the rental expense portion from the rental income.
  
• Immediate Family Rental - The IRS may turn down rental expense claims when a house is rented by an immediate family member even if the persona is paying the market rate for the house.
  One therefore needs to be careful when renting out to such immediate family.
  
• Losses on Rental - When the rental expenses in Schedule E exceed the rental income, then the taxpayer can deduct the loss.
  However, the deductible loss is capped at $25,000 for taxpayers who have an Adjusted Gross Income (AGI) of $100,000 or below.
  The limit of loss that one can deduct reduces as the AGI increases and is faced off at an AGI of $150,000.
  However, for taxpayers with a mix-use rental property, they can deduct the rental loss only if the personal use of the property is less than 10%.