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Page 2 of 38 Fileid: … tions/p527/2023/a/xml/cycle02/source 13:48 - 24-Jan-2024
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
What’s New Reminders
Standard mileage rate. For 2023, the standard mileage Net Investment Income Tax (NIIT). You may be subject
rate for the cost of operating your car, van, pickup, or to the NIIT. NIIT is a 3.8% tax on the lesser of net invest-
panel truck increased to 65.5 cents a mile. ment income or the excess of modified adjusted gross in-
Section 179 deduction dollar limits. For tax years be- come (MAGI) over the threshold amount. Net investment
ginning in 2023, the maximum section 179 expense de- income may include rental income and other income from
duction is $1,160,000. This limit is reduced by the amount passive activities. Use Form 8960 to figure this tax. For
by which the cost of section 179 property placed in serv- more information on NIIT, go to IRS.gov/NIIT.
ice during the tax year exceeds $2,890,000. Form 7205, Energy Efficient Commercial Buildings
Qualified paid sick leave and qualified paid family Deduction. This form and its separate instructions are
leave payroll tax credit. Generally, the credit for quali- used to claim the section 179D deduction for qualifying
fied sick and family leave wages, as enacted under the energy efficient commercial building expense(s).
Families First Coronavirus Response Act (FFCRA) and
Excess business loss limitation. If you report a loss on
amended and extended by the COVID-related Tax Relief
line 26, 32, 37, or 39 of your Schedule E (Form 1040), you
Act of 2020, for leave taken after March 31, 2020, and be-
may be subject to a business loss limitation. The disal-
fore April 1, 2021, and the credit for qualified sick and fam-
lowed loss resulting from the limitation will not be reflected
ily leave wages under sections 3131, 3132, and 3133 of
on line 26, 32, 37, or 39 of your Schedule E. Instead, use
the Internal Revenue Code, as enacted under the Ameri-
Form 461 to determine the amount of your excess busi-
can Rescue Plan Act of 2021 (the ARP), for leave taken
ness loss, which will be included as income on Schedule
after March 31, 2021, and before October 1, 2021, have
1 (Form 1040), line 8p. Any disallowed loss resulting from
expired. However, employers that pay qualified sick and
this limitation will be treated as a net operating loss that
family leave wages in 2023 for leave taken after March 31,
must be carried forward and deducted in a subsequent
2020, and before October 1, 2021, are eligible to claim a
year.
credit for qualified sick and family leave wages in the quar-
ter of 2023 in which the qualified wages were paid. For See Form 461 and its instructions for details on the ex-
more information, see Form 941, lines 11b, 11d, 13c, and cess business loss limitation.
13e; and Form 944, lines 8b, 8d, 10d, and 10f. You must Photographs of missing children. The Internal Reve-
include the full amount (both the refundable and nonre- nue Service is a proud partner with the National Center for
fundable portions) of the credit for qualified sick and family Missing & Exploited Children® (NCMEC). Photographs of
leave wages in gross income on line 3 or 4 of Schedule E missing children selected by the Center may appear in
(Form 1040), as applicable, for the tax year that includes this publication on pages that would otherwise be blank.
the last day of any calendar quarter with respect to which You can help bring these children home by looking at the
a credit is allowed. A credit is available only if the leave photographs and calling 1-800-THE-LOST
was taken after March 31, 2020, and before October 1, (1-800-843-5678) if you recognize a child.
2021, and only after the qualified leave wages were paid,
which might, under certain circumstances, not occur until
a quarter after September 30, 2021, including qualifying
quarterly payments made during 2023. Accordingly, all Introduction
lines related to qualified sick and family leave wages re-
Do you own a second house that you rent out all the time?
main on the employment tax returns for 2023.
Do you own a vacation home that you rent out when you
Note. A credit is available only if the leave was taken or your family isn't using it?
after March 31, 2020, and before October 1, 2021, and These are two common types of residential rental activ-
only after the qualified leave wages were paid, which ities discussed in this publication. In most cases, all rental
might, under certain circumstances, not occur until a quar- income must be reported on your tax return, but there are
ter after September 30, 2021, including qualifying quar- differences in the expenses you are allowed to deduct and
terly payments made during 2023. Accordingly, all lines re- in the way the rental activity is reported on your return.
lated to qualified sick and family leave wages remain on Chapter 1 discusses rental-for-profit activity in which
the employment tax returns for 2023. there is no personal use of the property. It examines some
common types of rental income and when each is repor-
Commercial clean vehicle credit. Businesses that buy
ted, as well as some common types of expenses and
a qualified commercial clean vehicle may qualify for a
which are deductible.
clean vehicle tax credit. See Form 8936 and its instruc-
Chapter 2 discusses depreciation as it applies to your
tions for more information.
rental real estate activity—what property can be depreci-
Bonus depreciation. The bonus depreciation deduction ated and how much it can be depreciated.
under section 168(k) begins its phaseout in 2023 with a Chapter 3 covers the reporting of your rental income
reduction of the applicable limit from 100% to 80%. and deductions, including casualties and thefts, limitations
on losses, and claiming the correct amount of deprecia-
tion.
2 Publication 527 (2023)
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