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Rent payments made on rental property is considered rental income and must be reported. However, rental income does not apply to security deposits. Insurance proceeds are also considered income.

You may, however, make deductions based on the depreciation of a rental building – depreciation can be claimed in the month the building is ready for tenants. Owners can also deduct management and maintenance expenses, wages paid to people who work on the building (such as superintendents), legal expenses for eviction proceeds, traveling expenses to look after properties, tax preparation fees, charging below fair market value, and the costs of canceling a lease.

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