If you own any rental property and you are paid rent from such property, then the rental income needs to be included as part of your earned income in your tax returns.
Earnings from rent includes all moneys received for use or for the occupancy of your rental property.
There are various guidelines provided by the IRS pertaining to IRS tax payments for rental income.
Some of these guidelines are explained below: Allowable Rental Expenses For taxation purposes, you are allowed to make various expense deductions that apply to the rental property.
The tax-allowed expenses include interests on any mortgages and bonds raised to finance the purchase of the rental property, any repairs and maintenance work done of the property, any agent fee for management, and rent collection, insurance, and any municipal rates.
If the tenant pays for any expenses and offsets it with the rent, then such expense payments need to be added to the rental income.
If they are tax allowable expenses, then you may deduct them from your rental earnings.
The IRS Publication 527 (Residential Rental Property) provides a detailed list of all the allowable rental property expenses and a detailed guideline on rental-property-related expenses.
When and What Rental Income to Report Rental income is reported in the same year that it is received.
The rental income should be included in your schedule for earned income.
Any advanced rents received should also be reported on the year of receipt and the IRS tax payments made.
If you received any security deposits at the start of a tenancy, such deposits should not be included in the rent income schedule, as this is not income because the funds are to be returned at the end of a tenancy agreement.
However, if you withhold the security deposit because of any non-compliance by the tenant, then such funds now need to be reported as rental income in the year such withholding is done.
Personal Use For Rental property If you use part of the rental property for your personal needs, then you will need to separate your personal expenses and the expenses incurred from your tenants.
You can then deduct the rental related expenses from the rental income and have this reported as your rental earnings.
However, if such rental expenses exceed the rental earnings, you may have a limit on the expenses to deduct.
Services in Lieu of Rent If your receive some services from your tenant in lieu of rent payments, then you need to include the rent market value of the rental property as part of your incomes.
However, if you have agreed on a price for such services, then you may use this as the rental income.