Maxine Aaronson, Attorney at Law
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Tax Newsletter

  • Tax Effects of Discharge of Indebtedness in Bankruptcy
    When the debts of an individual or business entity exceed the fair market value of assets, one option is to seek protection from creditors under U.S. Bankruptcy laws. There are several forms of bankruptcy actions that may be filed,... Read more.
  • Federal Tax Credit for the Elderly and Disabled
    There are numerous laws and programs that benefit elderly taxpayers on local, state and national levels. Among them is a direct federal tax credit for elderly and disabled taxpayers. This particular tax credit includes a provision that... Read more.
  • Mischaracterization of Child Support as Alimony
    Three major issues commonly resolved in a divorce decree or agreement are: alimony, or spousal support; division of property; and child support. Each has its own tax treatment and implications. In general, for federal income tax... Read more.
  • Divorce and Federal Income Taxes
    Prior to filing for divorce, various federal tax considerations should be reviewed due to their potentially profound implications. Among the major issues commonly covered in a divorce decree or agreement are: alimony, sometimes referred... Read more.
Tax News Links

Taxable 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.