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A tax problem about how and where to report rental income items on income tax return forms:
Decision to sell or rent a condo for extra income to pay off the house. Have had condo rented for 5 years. Mike purchased a condo for $125,000. A similar condo recently sold for $165,000. They still owed $87,000 in mortgage payments. Their real estate agents told them that the rule of the thumb was to charge an annual rent to approximately one-seventh of the FMV of building. He agreed on asking $1950 a month plus utilities. Left appliances in condo, but renter has to take care of their own furnishings. The appliance had originally cost $9,000 but were now worth about $2,000.
On April 2, Mike ran ads in newspaper and a couple signed on the dotted line. The terms of lease were 1 year at $1950 a month, beginning May 1. The lessees required to pay a $1,500 security deposit and rent due at beginning of the month.
As of Dec. 1 they spent the following expenses on the condo.
Mortgage payments (12X$825)= $9,900
Homeowners Association Fees (12X$60)= $720
Real estate taxes= $3290*
Homeowner`s insurance (April 1-March 31)= $300**
Advertising= $86
Rugs professionally cleaned= $475
*In Illinois, real estate taxes are assessed on a calendar-year basis. They are paid the previous year.
**Mike paid $115 annually before their premiums increased due to rental use of the property. Insurance premiums generally must be paid before the period covered.