Lease Option And Rental Income

Say you buy a home, where you monthly mortgage payment, including Taxes and Insurance is $1500/mo.

You then lease this home on an option to buy, with $5000 option consideration.

Your lease is $1600/mo with $300/mo credit.

Now, what is your income? Is it the difference between 1600 and 1500 (or 100/mo or $1200/year) or is it full $1600/mo (or 19200/yr)?

Also, is $5000 option considered part of the income for tax (IRS) purposes?

Thanks,
vk

Comments(3)

  • LeaseOptionKing10th May, 2005

    Your income is the full amount of rent from which you would subtract deductions and depreciation. The $5,000 is not income until the the year in which the Option is exercised or defaulted.
    [addsig]

  • JRendell6th May, 2005

    Thanks Maddog56. I will look into this.

  • LeaseOptionKing10th May, 2005

    Your Option should clearly spell out the terms of the sale IF exercised. With good paperwork, you do not need a separate Sales Contract.
    [addsig]

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