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
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]
Thanks Maddog56. I will look into this.
Your Option should clearly spell out the terms of the sale IF exercised. With good paperwork, you do not need a separate Sales Contract.
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