As a tax professional with extensive experience in property taxation, I can provide you with a comprehensive understanding of the tax implications of rental income. It's important to note that tax laws vary significantly by country and even within different jurisdictions within a country, but I will provide a general overview that should be applicable in many scenarios.
First and foremost, yes, you are generally required to pay taxes on income derived from a rental property. This income is considered unearned income, which means it is not derived from your personal labor or services. The tax treatment of rental income can be complex, as it involves various deductions and potential tax credits that can affect your overall tax liability.
When you receive rental income, you must report this on your tax return. The specific form or schedule you use will depend on your country's tax system, but typically, it's reported on a form that deals with income from businesses or investments, such as Schedule E in the United States.
Now, let's discuss the deductions you can claim to offset your rental income. These deductions can help reduce your taxable income, thereby lowering the amount of tax you owe. Some of the common deductions include:

1. Mortgage Interest: If you have a mortgage on the rental property, the interest you pay on this loan is usually tax-deductible. This can be a significant deduction, especially if you have a large mortgage.

2. Property Tax: The property taxes you pay on your rental property are also deductible. This can include both general property taxes and any special assessments that are part of your property tax bill.

3. Operating Expenses: These are the day-to-day costs associated with maintaining the rental property. This can include utilities, insurance, landscaping, and maintenance costs.

4. Depreciation: Rental property is considered a capital asset, and you can claim depreciation on the property's value over a set period. Depreciation is a non-cash expense that can reduce your taxable income.

5. Repairs: Costs associated with maintaining and keeping the property in good condition are deductible. This includes minor repairs and replacements.
However, it's important to distinguish between repairs and improvements. While repairs are deductible, improvements to the property, which are considered to increase the property's value or extend its useful life, are not immediately deductible. Instead, they are capitalized and depreciated over time.
It's also worth noting that there are limits and restrictions on these deductions. For example, if you are considered a passive investor in the rental property (meaning you do not materially participate in the operation of the property), your deductions may be limited by the passive activity loss rules.
Lastly, tax laws are subject to change, and the information provided here is based on general principles that were accurate as of my last update. It's always advisable to consult with a tax professional who is familiar with the most current tax laws in your jurisdiction to ensure compliance and to maximize your deductions.
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If you receive rental income from the rental of a dwelling unit, there are certain rental expenses you may deduct on your tax return. These expenses may include mortgage interest, property tax, operating expenses, depreciation, and repairs. ... You may not deduct the cost of improvements.Dec 22, 2017read more >>