Yes, you should report the "rent" portion of the payment on your taxes. The escrow portion of the monthly payment will factor into your capital gains when you sell the property.
For example, if they pay $1000 a month and $700 of that is considered rent and $300 goes towards the down-payment, then you claim $700 as rental income on your taxes. The $300 comes to play when they exercise their option and actually purchase the property.
You can report this
activity under Wages & Income
>> Rental Properties. Please follow
the instructions below for entering income, expenses, and capital assets
(building and improvements). The capital asset section will calculate
depreciation expense for you based on the information you enter. You will need this information when you eventually complete the sale.
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