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Rental Tax
RENTAL TAX
Many cities and counties charge rental tax on any lease or rent residential real property located within their jurisdiction. The entity leasing or renting to the tenant in actual possession is responsible for the rental tax.
The rental tax is charged on rentals: houses, condos, townhouses, apartments, manufactured homes, and mobile home (trailer) spaces. Rental of a residential space, such as a room to a college student, is also taxable.
All amounts paid by the renter to, or on behalf of, the owner are taxable. In addition to rent, taxable income includes payments by the tenant for:
• Pet fees
• Telecommunications (cable TV, phone, internet)
• Non-refundable deposits
• Forfeited deposits
• Utilities
• Pool service or landscape maintenance
• Homeowner association fees
• Late fees, court fees and legal fees
• Repairs and/or improvements
• Property taxes
• Mortgages or home equity loans
RENTAL TAX CALCULATION
The rental tax is calculated on gross receipts. It is not a tax on net income. Expenses are not deductible. Some of the monies collected may be taken as a deduction on your tax return when they are included in the gross reported receipts:
• City tax collected or factored
• Bad debts on which tax was paid on a previous return
• Refundable security deposits, unless they are forfeited
• Utility charges, only if individual utility meters have been installed and each tenant pays the exact amount billed by the utility company
• Room charges to patients of qualifying health care organizations
Some of the expenses paid by the owner or tenant which are NOT allowable deductions are:
• Payments for repairs, pool service, landscape maintenance or other service labor
• Homeowner association fees
CALCULATING THE FACTORED TAX DEDUCTION
If you include tax in your rent (no separate charge for tax), The amount of tax included in gross income that can be deducted can be calculated as follows:
Gross X Factor = Factored Tax Income Rate Deduction
Example: $950.00 X 0.017681 = $16.80
The rental tax can be deducted on Schedule E
This blog post for Real Estate Professionals, Investors, Landlord, Property Manager, and Property Management Companies is brought to you by SimplifyEm Pay Rent Online and Property Management Software
This is a blog post for Real Estate Professionals, Investors, Landlord, Property Manager, and Property Management Companies. Rental Tax is brought to you by SimplifyEm Pay Rent Online and Property Management SoftwareYou might also want to read:
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