Law Office of Tillena G. Clark, LLC

Directions7315 Wisconsin Ave., Suite 400W
Bethesda, Maryland 20814

Tax Newsletter

Landlords, Tax and Rental Income

Rental income is considered any payment you receive in exchange for the use or occupation of property. For the purposes of federal income tax filings, you must include all rental income as part of your total gross income.

Rental-related incomes can include:

  • Advance rent, regardless of the period covered. For example, if you receive $5,000 all at once for the first and last month’s rent on a five-year lease, you’d report the total amount received as income for that filing year.
  • Security deposits, if not returned to the renter. Any portion of a security deposit kept because a tenant did not live up to the terms of the lease is considered income.
  • Payments which a tenant makes for canceling a lease.
  • Any tenant-paid expenses, such as emergency repairs to a broken furnace. The repair cost may then be deductible as a rental expense.
  • Property or services in lieu of rent. Include the fair market value, or agreed upon price, as income on your tax return. For example, if a painter/tenant agrees to paint your apartment building in exchange for not paying two months’ rent, you would report the rent’s value, and then typically deduct the painting as a rental expense.
  • Lease with option to buy. Payments received under an agreement with an option to buy clause are generally considered rental income. However, payments after the option is exercised are part of the property’s selling price.
  • Rental of property also used as a home. If you rent your home out for 15 or more days a year, it is reportable income.
  • Part interest. If you co-own a rental property, you must report your proportionate share of the rental income.

Whether you rent out rooms, buildings or apartments, you normally report your rental income in conjunction with your rental expenses.

  • What Are The Penalties For Not Filing Your Tax Return On Time?
    Many taxpayers at one time or another find themselves in a situation where they either did not file their Federal Income Tax return on time and/or filed their tax return without making the necessary payment for the tax year covered. In... Read more.
  • Payment Failure Due to Faulty Advice
    When a taxpayer fails to file a tax return or to pay a tax that is due, the IRS will impose a penalty. However, a taxpayer will be excused from paying the penalty for failure to file or pay if he or she shows that there was reasonable... Read more.
  • "Excess Alimony" Tax Rules for Divorce Payments
    Most divorces involve a division of property between the spouses. If there are children from the marriage, the parent not granted custody usually must pay monthly child support. In addition, one of the spouses may be granted monthly... Read more.
  • Tax Effects of Personal Injury Award Allocations
    The U.S. Internal Revenue Service (IRS) takes a broad view of what is considered “income” for purposes of taxation. The U.S. Supreme Court has provided additional interpretation, stating that “any funds”... Read more.
Tax News Links
Share This Page:
Designed and Powered by NextClient

© 2006 - 2020 Tillena G. Clark, LLC. All rights reserved.
Theme WebExpress™ attorney website design by NextClient.com.