Landlord wants tenant to pay property taxes for entire residential house tenant is renting. Landlord then reducing the rent based on the property taxed by tenant. Any IRC violations here?
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does the tenant pay the property tax directly to the assessor and separate of the rent? Tenant would not be able to take the deduction. If it is included in rent and not paid separately then it is simply rent amount based on owner expense of renting the unit.Believe nothing you have not personally researched and verified. -
It would seem you are venturing into a Triple Net Lease --- one thought would be to look at the State/county Rental/Tenant Laws to see if it is allowed, and more importantly the "Lease" that was signed with the Tenant.
I don't believe IRS cares one way or the other - as long as the Tenant/Landlord reports the accurate income/expenses.
An example of this which is common in Commercial Rental - is what is referred to as Triple Net Rent - Base Rent, plus another charge for Landlords expenses, passed through as Landlord Expenses representing property tax, insurance, common area maintenance. . If Triple Net, then Landlord collects the pro-rata share from tenant as income, and then the Landlord also deducts the appropriate expenses. Tenant would just include in the Gross Lease Amount as Lease/Rent Paid.
SandyComment
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Is this based on a written lease? Is this a commercial tenant?Originally posted by AZ-Tax View Post
Here in my neck of the woods it is very common for commercial tenants to pay the landlord a prorata share of the property tax, parking lot maintenance fee, common security etc. I have 2 clients who have a written lease and these items are billed on a quarterly basis. The check is made payable to the landlord and we deduct the entire amount paid to the landlord as "Rent" on Sch C.Taxes after all are the dues that we pay for the privileges of membership in an organized society. - FDRComment
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Well, you said "entire residential house".... so does that mean he is renting only part of it? If it is a residential rental, the tenant could reduce the rent by the amount of the property taxes paid on behalf of the owner, but the entire amount is considered rent paid. No deduction by the tenant. Owner deducts. It is just a convenience for the owner. Run into this occasionally when tenants pay for repairs, then reduce the rent by his out-of-pocket. It is still rent.Originally posted by AZ-Tax View PostComment
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Well, you said "entire residential house".... so does that mean he is renting only part of it? If it is a residential rental, the tenant could reduce the rent by the amount of the property taxes paid on behalf of the owner, but the entire amount is considered rent paid. No deduction by the tenant. Owner deducts. It is just a convenience for the owner. Run into this occasionally when tenants pay for repairs, then reduce the rent by their out-of-pocket. It is still rent and the owner deducts the repairs on his Sche E.Originally posted by AZ-Tax View PostComment
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Well, you said "entire residential house".... so does that mean he is renting only part of it? If it is a residential rental, the tenant could reduce the rent by the amount of the property taxes paid on behalf of the owner, but the entire amount is considered rent paid. No deduction by the tenant. Owner deducts. It is just a convenience for the owner. Run into this occasionally when tenants pay for repairs, then reduce the rent by their out-of-pocket. It is still rent and the owner claims full amount as income and deducts the repairs on his Sche E.Originally posted by AZ-Tax View PostComment
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