Rental income received by an individual from another individual is subject to monthly income tax through the Carnê-Leão. If the tenant is a legal entity, the tax is withheld at source (withholding income tax).
The Federal Revenue allows the deduction of certain expenses from the gross rental income before calculating the tax due on the Carnê-Leão. The deductible expenses are:
These expenses reduce the taxable base, so you only pay tax on the net rental income.
The tax calculated on the Carnê-Leão (DARF guide code 0190) must be paid by the last business day of the following month after receiving the rental income. Late payment generates a daily fine of 0.33% (limited to 20%) and interest based on the Selic rate.
If the property belongs to the couple in a joint ownership, the rental income can be taxed 50% in each spouse's declaration or 100% in one of the spouse's declarations. Dividing the rental income between two declarations can be very advantageous if it places both spouses in lower tax brackets.