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Who pays taxes on the interest a rental deposit generates? nickravo1@gmail.com 03-26-2008
Posted by removeps-groups@yahoo.com on March 26, 2008, 12:19 pm
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 On Mar 26, 7:04 am, an_ordinary_guy_...@hotmail.com (Bill) wrote:

> States may have legislation which would affect this issue. Normally,
> such interest would properly be held in escrow, and any interest might
> be credited as miscellaneous income to the property, if the escrow
> account pays interest.

But then it would be double tax, right?

> 40 years ago, when I last had some income property, I accrued the
> interest as a credit toward the deposit total ... and when the tenant
> departed (with no security or damage deductions), I included the imputed
> interest as an increase to the original deposit amount -- to the
> satisfaction of my tenant (who was surprised I did so).

Was any tax paid on big interest payment that was added to the
deposit? In general, gradual interest payments are better though as
they keep you from going to a higher tax bracket, but the amounts here
are probably very small.

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Posted by nickravo1@gmail.com on March 26, 2008, 7:07 pm
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 On Mar 27, 3:19 am, "removeps-gro...@yahoo.com" <removeps-
gro...@yahoo.com> wrote:
> On Mar 26, 7:04 am, an_ordinary_guy_...@hotmail.com (Bill) wrote:
>
> > States may have legislation which would affect this issue.  Normally,
> > such interest would properly be held in escrow, and any interest might
> > be credited as miscellaneous income to the property, if the escrow
> > account pays interest.
>
> But then it would be double tax, right?
>
> > 40 years ago, when I last had some income property, I accrued the
> > interest as a credit toward the deposit total ... and when the tenant
> > departed (with no security or damage deductions), I included the imputed
> > interest as an increase to the original deposit amount -- to the
> > satisfaction of my tenant (who was surprised I did so).
>
> Was any tax paid on big interest payment that was added to the
> deposit?  In general, gradual interest payments are better though as
> they keep you from going to a higher tax bracket, but the amounts here
> are probably very small.
>
> --
> << ------------------------------------------------------- >>
> << The foregoing was not intended or written to be used,   >>
> << nor can it used, for the purpose of avoiding penalties  >>
> << that may be imposed upon the taxpayer.                  >>
> <<                                                         >>
> <<   The Charter and the Guidelines for submitting posts   >>
> <<  to this newsgroup as well as our anti-spamming policy  >>
> <<                  are atwww.asktax.org.                 >>
> <<         Copyright (2007) - All rights reserved.         >>
> << ------------------------------------------------------- >>

Really not following here. Do I pay the taxes on the deposit interest
or does the tenant? It's in a bank, accruing interest. I get a INT
form at the end of the year with this amount. I pay the taxes on this
even though it's the tenants money?

========================================= MODERATOR'S COMMENT:
Please delete all unnecessary material from the prior message when
responding.

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

Posted by parrisbraeside@yahoo.ca on March 27, 2008, 7:42 am
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>
> Really not following here. Do I pay the taxes on the deposit interest
> or does the tenant? It's in a bank, accruing interest. I get a INT
> form at the end of the year with this amount. I pay the taxes on this
> even though it's the tenants money?

As mentioned, you set this as nominee interest. It is declared on your
tax return and nomineed to the tenant. The tenant pays the taxes on
the interest as it is their interest.

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

Posted by Bill on March 27, 2008, 8:57 am
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parrisbraeside@yahoo.ca posted the following as a sort of wrapup to my
sidebar discussion of rental deposits:

>>Really not following here. Do I pay the taxes
>>on the deposit interest or does the tenant?
>>It's in a bank, accruing interest. I get a INT
>>form at the end of the year with this amount. I
>>pay the taxes on this even though it's the
>>tenants money?

>As mentioned, you set this as nominee
>interest. It is declared on your tax return and
>nomineed to the tenant. The tenant pays the
>taxes on the interest as it is their interest.

I have no argument here, but simply wanted to clarify my original
anecdotal comment: In those halcyon days, there was no such thing as
"checking account interest" at most banks, and I simply allowed the
deposit for my tenant to sit in the account I maintained for the rental
property. There was actually no interest earned, no 1099 generated, and
that's why I referenced my passing along "imputed interest" to the
tenant as I returned the security deposit.

I don't know whether she reported it, and I certainly didn't issue any
report, other than the Schedule E equivalent for that era -- and I don't
recall how I handled the "interest" ... which was a very minor amount in
those low-rent days. (This was long before I became an avid student of
taxes.)

Bill

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

Posted by nickravo1@gmail.com on March 27, 2008, 4:44 pm
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On Mar 27, 10:42 pm, "parrisbraes...@yahoo.ca"
> > Really not following here. Do I pay the taxes on the deposit interest
> > or does the tenant? It's in a bank, accruing interest. I get a INT
> > form at the end of the year with this amount. I pay the taxes on this
> > even though it's the tenants money?
>
> As mentioned, you set this as nominee interest. It is declared on your
> tax return and nomineed to the tenant. The tenant pays the taxes on
> the interest as it is their interest.
>
> --
> << ------------------------------------------------------- >>
> << The foregoing was not intended or written to be used,   >>
> << nor can it used, for the purpose of avoiding penalties  >>
> << that may be imposed upon the taxpayer.                  >>
> <<                                                         >>
> <<   The Charter and the Guidelines for submitting posts   >>
> <<  to this newsgroup as well as our anti-spamming policy  >>
> <<                  are atwww.asktax.org.                 >>
> <<         Copyright (2007) - All rights reserved.         >>
> << ------------------------------------------------------- >>

How do I set nominee interest. What forms?

========================================= MODERATOR'S COMMENT:
please trim the post to which you are responding

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

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