Indianapolis, IN asked in Real Estate Law, Tax Law and Landlord - Tenant for Indiana

Q: Do I have to report "income" on real estate payment received only to cover the mortgage from current tenants?

Father's exwife owns the property. People that live in the house pay him, not her, directly the monthly amount to cover the mortgage payment on the property and nothing more. Is this considered "rental income" and should it be reported to the IRS? If so, who's taxes should it be reported on? Her because she owns the property? Or him because he receives the money every month?

1 Lawyer Answer
James L. Arrasmith
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  • Landlord Tenant Lawyer
  • Sacramento, CA

A: In this scenario, the money received from tenants to cover the mortgage is typically considered rental income and should be reported to the IRS. The key factor isn't the amount received but rather the fact that payment is made for the use of the property.

As for whose taxes it should be reported on, it generally depends on who owns the property and who has the right to receive the rental income. If the ex-wife is the legal owner of the property, the income is usually reportable on her taxes. However, if the agreement is such that your father is responsible for collecting rent and managing the property, this could complicate the situation.

It's also important to consider any legal agreements or court orders regarding the property, especially in the context of a divorce. These documents might specify how income and expenses should be handled.

Given the complexity of tax laws and the unique nature of your situation, it's advisable to consult with a tax professional. They can provide personalized advice based on the specifics of the property ownership and the financial arrangement. Timely and accurate reporting of rental income is crucial to avoid any potential issues with the IRS.

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