If you receive rent from anyone who lives in your property, you’re considered a landlord and must report this as taxable income. The money you receive is considered income in the year you receive it, and you are required to file taxes.
You are allowed to deduct necessary expenses required to maintain and manage your property, but expenses can only be deducted the year in which they’re paid.
Here are a few deductible expenses:
Taxes and tax return preparation
Advertising the property
Cleaning and cleaning supplies
Real estate taxes
Travel to and from the property
All improvements to the property are considered an asset and should not be included as an expense.
Security deposits are not taxable since they are to be returned to the tenant at the end of the lease. However, if you end up taking part of the security deposit, then it is taxable and must be included on the income that you show on your tax return for the year that the tenant vacates.
Barrons Property Managers can take care of all this for you, and at the end of the year we give you a 1099 for you to give to your tax accountant