Renting Garden Apt/Tax Issues
I’m contemplating renting my currently unoccupied garden apt. to a business for a 6-month period…assuming the tenant won’t pay cash, do I need to worry about paying taxes on the rent/mucking up my tax situation/etc.?
I’m contemplating renting my currently unoccupied garden apt. to a business for a 6-month period…assuming the tenant won’t pay cash, do I need to worry about paying taxes on the rent/mucking up my tax situation/etc.?
DIBS you are correct. I don’t know those accounting terms, just know that we plug these #s in to Turbo Tax and that’s the rough equation.
Do you really want to get audited? Spend $300 (tax deductible) a year and get a tax attorney to do your taxes. Once you land on the IRS and NY Dept Taxation and Finance radar screens you’ll be there forever. They can also file a lien on your property. Al Capone killed dozens of people and went to jail for tax evasion – think about it.
There is another post on this blog today about a neighbor calling 411 about what they think is work being done without a permit, this city is full of people who have nothing better to do than report their neighbors to the government for perceived infractions of the law.
For example, our rentals are half our building, so this year 50% of what we spent on chimney lining and facade repair will be deducted from our rental income,
Those items are technically capital improvements and should be added to the cost basis of the property and then 50 amortized against the tenant income.
Doing work without permits is one thing. Blatant tax fraud carries much higher penalties as newsouthsloper says.
Yeah, Im no longer interested in “mucking up my tax situation either” but I havent figured out a way to not report my income legally.
Seriously, if you dont play by rules and get caught, be prepared to suffered the consequences…
I can guarantee you that business is going to be reporting the rent they pay you as a deduction against their own income. It only takes 1 jealous person or “concerned citizeb” to report you. Once you get Audited, be prepared for the IRS to go through every detail of your finances with a fine tooth comb for the last several years.
If it’s income, yes, you are required to report it.
That said, you can deduct utilities, capital expenses and mortgage interest from that income.
For example, our rentals are half our building, so this year 50% of what we spent on chimney lining and facade repair will be deducted from our rental income, as well as 50% of our hot water and heating bills. We will also deduct 50% of the interest we paid this year on our mortgage, which is a really nice benefit.
Honestly, for just one unit, the complexity of reporting the income is pretty small… and of course you make a profit.