If you have a place that you rent out, you have to report your income.
What is included in Rental Income? EVERYTHING!
In addition to rent payment, you have to include in the income
– any type of advance rent,
– payment to lease cancellation,
-security deposit (unless you are planning on returning it to your tenants at the end of the lease, but if you are keeping a part of the security deposit because tenants did not live up to the term of the lease, then you have to include that portion as your rent income.)
-if instead of the money you receive services or property, fair market value needs to be included as a rent income.
On a bright side, you can deduct pretty good list of expenses. Such as interest on your mortgage, real estate taxes, advertising, maintenance, utilities, insurance and homeowners dues and mileage.
You can deduct repairs that were done to keep a property in good operating condition.
And yes, if your expenses exceed your income, you can report loss up to $25,000; amount goes down for filers who AGI is above $100,000