Post by LoveTrains on Jan 22, 2014 11:26:33 GMT -5
Another landlord question.
I keep the sec deposit and last month's rent in an interest bearing savings account for my tenants.
Per state law, when my previous tenant moved out, I paid him the interest on the account. Now, it's not a ton of money, but it got me thinking when I was just doing my taxes.
I am presently paying income taxes on the interest that this account makes. I then pay my tenant the interest. Thus I'm paying taxes on money that isn't technically mine nor is it my income.
How do you folks handle this? Do you set up the savings account in a different name? I don't understand what to do to avoid this, or is it just a cost of doing business.
That's a good question that I never thought of. I can't think of any way that you could get out of paying the tax on that interest, even though it's not yours.
Our security deposit is kept in an escrow account, which I'd imagine solves the problem of who pays the tax on the $.52 (that's what ours earned this year, and we already got the tax form for it!)
What are the laws regarding paying interest to your tenant? Google suggests that it may not be required by RI law, in which case the money *is* yours (of course, these resources could be wrong, but more legitimate-seeming resources are silent on the issue which may also mean that it isn't required)... worth looking into it.
Our security deposit is kept in an escrow account, which I'd imagine solves the problem of who pays the tax on the $.52 (that's what ours earned this year, and we already got the tax form for it!)
That makes sense. In my province the required interest on security deposits has been held at 0% for the last few years, so it's a moot point.
Our security deposit is kept in an escrow account, which I'd imagine solves the problem of who pays the tax on the $.52 (that's what ours earned this year, and we already got the tax form for it!)
What are the laws regarding paying interest to your tenant? Google suggests that it may not be required by RI law, in which case the money *is* yours (of course, these resources could be wrong, but more legitimate-seeming resources are silent on the issue which may also mean that it isn't required)... worth looking into it.
You forget that my condo is in Massachusetts, which absolutely 100% requires that I pay the tenants the interest.
ETA: It was something like $50 or $60 which I paid him when he moved out after four years. So I guess the tax was probably $12 or $15 over those four years but I was just curious about it. Frankly I'm still annoyed that i don't get to deduct all my losses and that condo is the biggest money suck in the world that even $2 annoys me.
In my state, you have to own a specific number of units in order to be required to put the deposit in an interest bearing account. Additionally, here landlords are allowed to deduct 1% of the deposit each year as an administrative fee, which would currently wipe out any interest anyhow.