Updated October 28, 2026. Quick answer: Worksheet 5-1 in Publication 527 limits your rental deductions for a home you also use personally and rent for 15 days or more, when the rental shows a loss. Part I finds the rental share of days, Part II allows expenses in a set order, and Part III carries the rest to next year.
What this worksheet is for
The publication says when it applies: “if you had a net loss from renting the dwelling unit for the year, your deduction for certain rental expenses is limited.” With a profit there is no limit: “deduct all of your rental expenses. You don’t need to use Worksheet 5-1.” The rental is also a passive activity question: the Form 8582 instructions list “The rental of a dwelling unit you used as a residence if section 280A(c)(5) applies.”
The worksheet line by line
| Line | What the worksheet says |
|---|---|
| Who may use it | “Use this worksheet only if you answer” yes to all three questions: “Did you use the dwelling unit as a home this year?” “Did you rent the dwelling unit at a fair rental price 15 days or more this year?” “Is the total of your rental expenses and depreciation more than your rental income?” |
| Part I, line A | “Total days available for rent at fair rental price” |
| Part I, line B | “Total days available for rent (line A) but not rented” |
| Part I, line C | “Total days of rental use. Subtract line B from line A” |
| Part I, line D | “Total days of personal use (including days rented at less than fair rental price)” |
| Part I, line E | “Total days of rental and personal use. Add lines C and D” |
| Part I, line F | “Percentage of expenses allowed for rental. Divide line C by line E” |
| Part II, line 1 | “Enter rents received” |
| Part II, line 2e | “Fully deductible rental expenses.” |
| Part II, line 3 | “Subtract line 2e from line 1. If zero or less, enter -0-” |
| Part II, line 4f | “Allowable expenses. Enter the smaller of line 3 or line 4e.” |
| Part II, line 5 | “Subtract line 4f from line 3. If zero or less, enter -0-” |
| Part II, line 6e | “Allowable excess casualty and theft losses and depreciation. Enter the smaller of line 5 or line 6d.” |
| Part III, line 7a | “Operating expenses to be carried over to next year. Subtract line 4f from line 4e” |
| Part III, line 7b | “Excess casualty and theft losses and depreciation to be carried over to next year.” |
Example: part of the year as a rental
Illustration, not an IRS example. Every input is invented and each result is computed from them.
| Item | Illustration |
|---|---|
| Line A: days available for rent at a fair price (invented) | 200 days |
| Line B: days available but not rented (invented) | 60 days |
| Line C, computed: line A minus line B | 140 days (computed) |
| Line D: days of personal use (invented) | 40 days |
| Line E, computed: line C plus line D | 180 days (computed) |
| Line F, computed: line C divided by line E | 0.778 |
| Part II line 1: rents received (invented) | $9,000 |
| Line 2e: fully deductible items (invented) | $4,200 |
| Line 3, computed: line 1 minus line 2e | $4,800 (computed) |
| Line 4e: operating expenses, rental portion (invented) | $6,000 |
| Line 4f, computed: smaller of line 3 and line 4e | $4,800 (computed) |
| Line 7a, computed: line 4e minus line 4f | $1,200 (computed) |
Here 77.8 percent of expenses are rental, the $9,000 of rents absorb the $4,200 of fully deductible items first, and only $4,800 of the $6,000 of operating expenses is allowed, so $1,200 carries to next year.
Allocating the limited deduction
“If you can’t deduct all of the amount on line 4e or 6d this year, you can allocate the allowable deduction in any way you wish among the expenses included on line 4e or 6d.”
Edition
This page reads Publication 527 (2025), the current file irs.gov served on 2026-10-28 (sha256 in the kit data). The Worksheet 5-1 in it is for the tax year 2025 return, filed in 2026. Check the tax year printed on the worksheet in your own copy and use that year’s line numbers and dollar amounts, because a different year’s worksheet can word its lines differently.
The worksheet’s instructions for lines 2a to 2c include a state and local tax step with a dollar cap that changes by year. This page does not restate it: use the amount printed in your year’s worksheet.
Common mistakes
- Using the worksheet for a rental you never used personally. Chapter 3 of the publication covers that case.
- Skipping Part I. Every rental portion on lines 2a to 2c, 4a to 4c and 6a to 6b uses the percentage from line F.
- Deducting the whole operating expense when the rental shows a loss. Line 4f caps it at line 3.
Related: Publication 527, renting the vacation home to family, and rental income in retirement.
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Answer againSources
- Publication 527 (2025), Residential Rental Property: https://www.irs.gov/pub/irs-pdf/p527.pdf
- Instructions for Form 8582 (2025): https://www.irs.gov/pub/irs-pdf/i8582.pdf
Read from the IRS documents linked above on October 28, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the account provider or the IRS is the right place to confirm anything consequential.