Welcome back! Ask questions, get answers, and join our large community of tax professionals.
cancel
Showing results for 
Search instead for 
Did you mean: 

How do you report rent to own Income?

cpn
Level 2

A client that has rental property income sold a rental home as a rent-to-own. Where do I report  the income and expenses?

Labels (1)
0 Cheers
1 Solution

Accepted Solutions
JRC
Level 5

Sounds like a "Land Contract" agreement.

View solution in original post

13 Replies 13
JRC
Level 5

Sounds like a "Land Contract" agreement.

View solution in original post

cpn
Level 2

Thanks,  I think so too.

0 Cheers
Terry53029
Level 12
Level 12

Sounds like a land contract to me also, if it is then your client sold his rental property on the installment method. see this link to get you started: https://www.irs.gov/taxtopics/tc705

PATAX
Level 11

@Terry53029 thanks for the link information...

0 Cheers
cpn
Level 2

Thanks for the link, I'll use it. This sale is for 2021. Just checking my options.  

0 Cheers
BobKamman
Level 14
cpn
Level 2

Thank you for the info and link.  I've  printed it and will use it properly more than once.  Thanks, again

0 Cheers
BobKamman
Level 14

I don't think the term "land contract" is even used in most states.  The concept is always available, though, under different names.  But the "rent to own" schemes I have seen are usually just rentals, with enough of an option for the tenant to buy that it will keep the place from sitting vacant.  Once the tenant moves in and finds all the flaws, they decide to look elsewhere -- the grass is always greener, in some other yard.  These days I'm surprised that a landlord would consider offering a purchase option, because tenants are already lined up (in most places) looking for a place to live, and the real estate market doesn't show much sign of cooling off.  

Anyway, don't get hurt from others taking a stab in the dark on telling you what this is.  

Terry53029
Level 12
Level 12

@BobKamman In WI land contracts are common, as well as rent to own.  land contract carries purchase obligations as the buyer had already committed into a financing agreement for the full purchase. On the other hand, a rent to own contract involves less obligations whereby the buyer has the option, but is not obligated to buy the property after the contract period.

BobKamman
Level 14

I know that. 

0 Cheers
Terry53029
Level 12
Level 12

You said that you did not think land contracts were used in most states, Nice that you know what goes on in most states. I'm lucky to keep up on my state of WI. 😁

0 Cheers
cpn
Level 2

Thanks, I'll take that into consideration.

0 Cheers
cpn
Level 2

I agree, Thanks

0 Cheers