Rental-income tax for property owners

Income, expenses, and interest

Net taxable rental income (不動産所得) must generally be reported: it is the rent received minus allowable expenses. You cannot deduct the full mortgage payment from rent — principal is not ordinarily a deductible expense, though mortgage interest may be deductible under the income-tax rules, with limitations and allocation issues. Allowable expenses typically include management and association fees, owner-paid utilities, insurance, fixed-asset and city-planning tax, leasing commissions, and maintenance. Keep clear records, because the classification of costs determines the tax.

Depreciation and repairs vs improvements

Depreciation is a tax accounting deduction, not cash income — it reduces taxable income without a cash outlay, based on the building’s allocated value and useful life, so the land/building allocation must be supported. You must also distinguish repairs from improvements: a deductible repair maintains the property, while a capital improvement is added to the basis and depreciated over time rather than fully deducted in the year. Getting this classification and the depreciation right requires care, so keep records and consider a tax accountant for a rental of any scale.

Key points to carry away: Net rental income is generally taxable and must be reported; You cannot deduct the full mortgage payment — principal is not an expense; Mortgage interest may be deductible, with limitations and allocation; Depreciation is a non-cash deduction; repairs and improvements are treated differently. Use the linked guides and calculators for the full decision, and confirm anything material with the lender, a licensed broker, a judicial scrivener, or a tax accountant before you act.