You probably already know that you need to count rental income as part of your federal gross income. What you may not know is that you must include:
- Any advance rent in the year you receive it, regardless of the period covered or the accounting method you use.
- Any expenses paid by tenants that are your obligations.
- The value of property or services received from tenants in lieu of rent.
- Security deposits that are to be used as final rent payments.
On the other hand, you don’t have to include security deposits in gross income if they’re to be returned to tenants at lease-end.
For additional information contact Nick Sarinelli, CPA, CFE or Doug Collins, CPA on (973) 298-8500 or visit our real estate services page.