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Rent to own tax questioh

dxg19

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Jun 4, 2008
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When reporting rent to own income for tax purposes, do you use Gross Rent including rent rebate or do you subtract rent rebate from the amount reported. Thank you in advance for any help.



Sincerely.



David
 

Thomas Beyer

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Aug 30, 2007
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you report taxable INCOME !



Income is cash collected minus operating expenses minus depreciation (up to 4% of house value) .. thus usually ZERO !



In an RTO situation a portion of your collected rent is usually a "downpayment" for a future purchase, thus a non-refundable deposit. A tax expert woudl know if this is (taxable) income or not yet. I'd argue yes, it is income as you will get it anyway .. now or later.
 

markl

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Oct 1, 2007
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Exactly as Thomas has stated. A rent to own is simply a rental where your tenant has the option to purchase the property therefore until they exercise that option they are simply renters.



Regards,
 

ToddStokowski

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Oct 26, 2007
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Hi,



For clarification reasons, is this way of phrasing your question, asking the same thing?



"How does the additional money paid per month by the Tenant above the regular monthly rental income get treated for income tax purposes - as income or as a deposit?"



Todd
 

George

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Sep 29, 2007
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Good morning,


Based on my review of a large number of RTO agreements I would suggest that the majority are constructed such that the entire payment is income. In contrast, some people believe that the deposit portion of a payment is treated similarly to a normal last-month's rent deposit or damage deposit.


Interestly, I'm currently reviewing an agreement which does appear to be structured in a fashion to provide a deferral of tax on the deposit.
 

neill

Airdrie, AB
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Oct 22, 2007
Messages
472
Hi George - can you comment on what it is in the agreements that would deem it as income? We have been accounting for ours as a liability - deposits, and it only would come into income if the tenant buyer does not exercise their option to purchase.



We collect 2 cheques - one clearly labelled as deposit, and keep copies of all - this will also serve to help the tenant buyer qualify later as proof that the funds were theirs...



Thanks

Neill
 
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