Elk Grove Tax Lawyer for Rental Property Owners

As a rental property owner, it is a challenging task to ensure that your property is always maintained properly. In addition to property maintenance, a rental property owner must also be sure to stay compliant with tax laws that apply to their rental activity. When juggling these responsibilities, it may be wise to seek help. If you need legal assistance to manage your tax liabilities for your rental property, you should consult with an experienced Elk Grove tax lawyer for rental property owners.

The NewPoint Law Group, LLP is here to offer you our legal services to help you handle your tax liabilities for your rental property. We understand that the tax code can be difficult to keep up with, and we are here to alleviate your concerns. To schedule a confidential legal consultation to discuss the tax liabilities for your rental property, contact the NewPoint Law Group, LLP at 800-358-0305. You can also use our online submission form to schedule your appointment.

Methods of Tax Reporting for Rental Property Income in Elk Grove

Individuals or companies that rent real estate should be aware of how federal taxes can affect their profits. If you fail to include rental income on your tax return, this could lead to a number of issues with the IRS. Note, however, that there are multiple factors that should be considered when reporting rental income.

One factor that should be considered when reporting rental income is the manner of reporting the income. For example, if you report rental income on a cash basis, this income must be reported in the year it is received. When reporting on a cash-basis, a taxpayer must be sure to report the income in the year it was received, no matter what date it was earned. This is the most popular form of accounting.

Alternatively, if a taxpayer uses the accrual method for reporting rental income, the income will have to be reported when it is earned rather than when it is received.

To learn more about the types of rental income that must be reported, you should continue reading and speak with an experienced Elk Grove tax lawyer.

Calculating Rental Property Income in Elk Grove, CA

When determining rental income, a rental property owner must include all types of rent payments in their gross income. According to the IRS, a property owner should consider rental income as any income earned for the use or occupation of a property. Note, however, that there are other types of payments that should be included in a calculation of rental property income.

The following are types of rental income that should be included in a taxpayer’s gross income.

Advance Rent

Advance rent is a payment a rental property owner receives prior to the date of service. When calculating advance rent, a taxpayer must include these payments in the year they were received despite whether the payment was for a future rent period. For example, if you were to sign a 5-year lease with a tenant and the tenant paid rent for the first and last year of the tenancy, each of these payments must be included in the rental income for the current year.

Security Deposits

Under certain circumstances, security deposits must also be included as rental income, like when a property owner accepts a security deposit as a final payment of rent. Alternatively, if you return the security deposit to the tenant at the end of the lease, then you should not consider it when calculating rental income. However, if you keep a portion or all of the security deposit due to tenant violation, you must include the amount in your rental income.

Cancellation Payment

At some point, a tenant may want to cancel their lease before the end of the term. Under these circumstances, it is normal for a rental property owner to have a provision in the lease agreement that requires a tenant to pay a certain amount of money to be released from the agreement early. When this happens, a rental property owner must include the cancellation payment in their rental income for the year it is received, despite the method of tax reporting being used.

Expenses Paid by a Tenant

If your tenant pays expenses for your rental property, this must be included in your rental income. For example, if your tenant pays the water bill for your property when that is not included in their lease agreement, you should include this as rental income.

Exchange of Services as Rent Payments

If you made an agreement with your tenant to substitute services for rent, this would also be included as rental income. For example, if a neighbor offers to perform landscaping on your property in exchange for a month of rent, you must include the amount of the rent the tenant would have paid in your rental income.

There are other factors that can affect tax reporting for rental income. Our firm would be happy to work with you to address your tax reporting needs.

Contact Our Experienced Elk Grove Tax Lawyer for Rental Property Owners

If you need help with reporting taxes for your rental properties, you should contact an experienced Sacramento tax lawyer for rental property owners. The legal team at the NewPoint Law Group, LLP has extensive experience managing complex tan law issues, and we would be pleased to work with you. To schedule a confidential legal consultation to discuss your tax reporting requirements, you should contact the NewPoint Law Group, LLP at 800-358-0305