The Definition of Gross Receipts for a Rental Property

Most of your rental income qualifies as gross receipts.

Most of your rental income qualifies as gross receipts.

Business income speaks a language of its own -- net income, gross income, operating expenses, gross receipts. If you're a landlord, gross receipts refers to your total income from your property before you deduct most of your expenses. Local governments use gross receipts when figuring various tax bills you have to pay.

Income

Your total income includes more than the monthly rent check. If you accept rent in advance, for example, that qualifies as income: a deposit to cover the last month's rent on a two-year lease is income the moment you receive it. The quarters that your tenants feed into the building washing machines count too. If you negotiate payment in kind -- your tenant makes plumbing repairs in exchange for half this month's rent, for instance -- you still include the rent amount in your gross receipts.

Expenses

The expenses you can deduct when figuring gross receipts -- if any -- depend on who you pay tax to. Santa Monica, California, allows you to deduct money spent on city fees -- such as inspections of rental property -- bad debts and any part of the security deposit you return to your tenant. Sarasota County, Florida, on the other hand, charges a tax on tourist rentals, with only one possible deduction: if you rent to military personnel or churches, they don't have to pay the tax, so subtract income for those nights from gross rental receipts.

Taxes

When you report rental income to the IRS, you subtract your expenses from your gross income and pay tax on the result. At the local level, gross receipts play a bigger role. Santa Monica bases its business tax on gross receipts, and Florida counties such as Sarasota do the same with bed taxes. Bed taxes are a popular tax-raising tool in tourist areas because they target "transient rentals" that cater to tourists rather than month-to-month rentals locals use.

Details

You may have to track income and gross receipts for multiple different levels of government, plus your own financial records. Don't confuse the different rules and requirements: telling your county tax collector that the IRS doesn't use the same definition of taxable income won't help you. Gross receipts include money you earn, even if you don't collect it: if you help support your parents by having the tenant pay them the check, it's still your income if you own the rental.

 

About the Author

Author of two film reference books, "Cyborgs, Santa Claus and Satan" and "The Wizard of Oz Catalog." Published in Air & Space, Backpacker, Newsweek, The Writer, and multiple trade journals (can fax samples if requested, don't have them available digitally)

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