Question

Jesse is the landlord of a single-family home, which he leased to Carlos in February 2023. Prior to moving in, Carlos paid $1,000 for the first month's rent and an additional $1,000 for the last month's rent (for a total of $2,000 advance rent). He then paid $10,000 in rent during the remainder of the tax year. What amount does Jesse include in gross rental income for this property on his 2023 tax return?

Answer 1

For tax purposes, landlords include all rental income received in their gross income. In Jesse's case, he received a total of $2,000 in advance rent, which comprises the first month's rent of $1,000 and the last month's rent of $1,000, plus an additional $10,000 in rent during the remainder of the tax year.

Here’s the calculation of Jesse's gross rental income:

1. Advance rent received:

   • First month's rent: $1,000
   • Last month's rent (which is also included in the current year): $1,000
   • Total advance rent: $2,000

2. Rent received during the year: $10,000

Now, adding these amounts together:

• Total rental income = Advance rent ($2,000) + Rent during the year ($10,000) = $12,000

Therefore, Jesse would include $12,000 in gross rental income on his 2023 tax return.