Include all of the income that your receive from the use of the property. This includes money received by tenants for utilities which may also be considered a rental deductable. Lease cancellation payments as well as fair market value of services or property received in place of money are considered rental income. Income does not include security deposit if returned.
Depending if you are a cash basis taxpayer or use an accrual method will define which year to record the income. If you’re a cash basis taxpayer record the income in the year of which you receive them. This also implies if you receive income in advance; record it to the year received not the year in which it applies. Expenses of the rental property can be deducted and are record in the year that you pay them not the year that they occurred. If you use an accrual method you’ll do just the opposite of a cash basis taxpayer. In this method you record the income in the year that it is earned. For example, if your tenant gives you money for January’s rent on December 2006 then the income would be recorded on your 2007 taxes. This applies for the expenses as well. If the water bill for December 2006 was paid in January 2007 they should be recorded in 2006.
- Managing, Conserving, or Maintaining of the property while it is not being rented
- Rental Payments if your lease the property from someone
- Rental of Equipment for property use
- Tax return preparation fees
- Travel expenses
- Local transportation expenses
Expenses do not include Improvements but they may be recovered in depreciation expenses. Check out IRS.Gov for more information on Ocean Isle Beach Rentals & Sunset Beach Rentals tax information.