Updated on

Is Rental Income From a Sublet Taxable?

Rental income from a sublet is taxable as ordinary income just like traditional rental income.

Rent that you receive from a subtenant is technically classified as rental income that should be declared in your annual taxes. According to the IRS, rental income is "any payment you receive for the use or occupation of property". This means that any money you receive from your subtenant, including utilities or anything else included in the lease in addition to their rent, is considered rental income1.

That said, you likely won't owe any taxes because of it. You will only need to pay taxes on the difference between your sublet rental income and the corresponding expenses.

Deducting expenses from sublet rental income

Any costs associated with the sublease count as expenses that you can deduct against your sublet rental income. You can deduct the cost of repairs, supplies, or maintenance necessary to keep the rental property in good operating condition1 in addition to the cost of the rent that you pay to the landlord.

Reporting sublet income to the IRS

It's a good idea to keep records of expenses and rental income over the course of the sublet so that you don't lose track. You will need the exact amounts, receipts, and the sources of receipts.

You report both your income and expenses on IRS Form 1040, also called Schedule E. You can read more about it on the IRS website.

What if I make a profit?

If there is money left over after you subtract all your expenses from your sublet rental income then you've earned a profit which will be taxed as ordinary income. A common scenario would be if you charge your subtenant more than the rent that you pay to the landlord.

[1] CCR §1951.4

The information provided on this website does not, and is not intended to, constitute legal advice.