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Taxes In the event I get a non-refundable deposit on a house…

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taxesIn the event I get...
taxesIn the event I get a non-refundable deposit on a house lease with option to buy, how will I be taxed? will the deposit be taxed? and during the duration of the lease?
Submitted: 6 months ago.Category: Tax
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1/6/2018
Tax Professional: Patrick Mullis, Certified Public Accountant (CPA) replied 6 months ago
Patrick Mullis
Patrick Mullis, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 21
Experience: Capital Accounting Analyst / Financial Analyst at Norfolk Southern
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Typically, you are taxed on cash received during the year. A non refundable deposit is considered an an advanced payment and is taxable when received, so you do not recognize the income over the life of the lease. Hope this helps if so please rate me 5 stars, Thanks and good luck.

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Customer reply replied 6 months ago
Oh I see, will escrow likely send out a 1099S? and is it treated like any regular sale of a home? Form 8949?
Tax Professional: Patrick Mullis, Certified Public Accountant (CPA) replied 6 months ago

If the tenant exercises the option to buy the non-refundable deposit would be treated as part of the selling price of the house (Form 8949). A 1099S would not need to be issued, the non-refundable deposit would be calculated into the gain / loss of the capital asset and be subject to the appropriate tax (short term / long term & related tax rate).

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Customer reply replied 5 months ago
Ok, sorry for late reply. The app doesn't work on my new android. I've tried uninstalling and reinstalling about five times. And I always forget to log on to my laptop and check for answers. So I see what needs to be done in the event the tenant chooses to buy. But as far as the deposit received during 2017, is that taxable? say the tenant doesn't know if he's going to end up buying. You said money received is taxable but which form is it reported on?
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Patrick Mullis, Certified Public Accountant (CPA)
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