Contents Introduction  ........................................ 1 Rental Income  ..................................... 2 Rental Expenses   ................................ 2 Repairs and Improvements   ............ 2 Other Expenses  .............................. 3 Condominiums and Cooperatives   .. 4 Not Rented for Profit   ......................... 4 Property Changed to Rental Use   ..... 5 Renting Part of Property   ................... 5 Personal Use of Vacation Home or Dwelling Unit   ............................... 5 Dwelling Unit Used as Home   ......... 5 Figuring Days of Personal Use   ...... 6 How To Divide Expenses  ............... 6 How To Figure Rental Income and Deductions ............................... 7 Depreciation ........................................ 7 Modified Accelerated Cost Recovery System (MACRS)   .................... 9 MACRS Depreciation Under GDS  .. 11 Optional Tables  ............................... 12 MACRS Depreciation Under ADS  .. 12 Casualties and Thefts  ........................ 13 Limits on Rental Losses   ................... 13 At-Risk Rules  .................................. 14 Passive Activity Limits  .................... 14 How To Report Rental Income and Expenses ...................................... 15 How To Get More Information   .......... 18 Index  .................................................... 19 Important Changes Depreciating   appliances,   etc.,   used   in   a rental  activity. Appliances,  carpets,  furni- ture, etc., used in a rental real estate activity are   classified   as   5-year   property.   Before 1999, however, IRS publications and Form 4562,  Depreciation and Amortization, classi- fied this property as 7-year property. If you previously claimed depreciation based on that classification, see Appliances, etc., used in a rental activity under Recovery Periods Under GDS. Photographs   of   missing   children. The Internal Revenue Service is a proud partner with the National Center for Missing and Ex- ploited    Children.    Photographs    of    missing children selected by the Center may appear in this publication on pages that would other- wise  be  blank. You  can  help  bring  these children home by looking at the photographs and calling  1–800–THE–LOST (1–800–843– 5678) if you recognize a child. Introduction This publication discusses rental income and expenses,   including   depreciation,   and   ex- plains how to report them on your return.    It also covers casualty losses on rental property Department of the Treasury Internal Revenue Service Publication 527 Cat. No. 15052W Residential Rental Property (Including Rental of Vacation Homes) For use in preparing 1999  Returns