DEFINITION of 'Residential Rental Property'

A type of property that derives more than 80% of its revenue from dwelling units. Residential rental property uses the 27.5 year modified accelerated cost recovery system (MACRS) schedule for depreciation.

Income from residential rental property is passive income.

BREAKING DOWN 'Residential Rental Property'

Only residential rental property that has been placed in service after 1986 is eligible for MACRS treatment. A dwelling unit is defined as either a house or apartment. Hotel and motel units do not qualify as residential rental property under the Internal Revenue Service's (IRS) definition of residential rental property.

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