Lease Option And Taxes Question.
I have a house that I have recently purchased that I plan to lease option. I am taking a 5% lease option fee at move in that will be credited towards the purchase if they close on the deal within the terms of the contract. I will also be offering $100 per month rent credit if it is paid on time. This works out to $3600 (5% of 72k) and $1200 for the buyer’s down payment at time of purchase. The house is in Ohio. The lease option will most likely be executed just over 1 year from my initial purchase. My question is how to handle the taxes (income) for each of these two kinds of payments? Any help / advice / guidance would be appreciated as all of my prior experience is just in buying, holding, and renting property.
Thanks
Jeff
Thank you for a response it was very helpful. I still have one question regarding the monthly rent credit. The rent is 675, 100 of which will go towards the deposit. Should I only show 575 for my rental income and again treat the 100 as a deposit?
If the above assumption is correct lets now assume they do not exersize their option to buy after one year and move out. Would I then report 4800 (3600+1200) of rental income for the current tax year when the rental agreement expires (in addition to the actual rental income)?
Thanks Jeff
Anyone?
Thanks
Jeff
Just what I was looking for.
Thanks
Jeff