Rental property - advance rent payment

[adityasaxena]

Hi,

I  contracted a rental agency to put my house for rent  toward the end of 2020. However the agency could find a renter only for lease starting on 1st Jan 2021. The rental agency received the first month  (JAN) rent in advance from renters on 30th Dec 2020. The agency then generated a 1099 MISC form for me  for rental income in 2020 though I did not receive the rent from rental agency in 2020 itself. Also the house was not leased at any point in 2020 - the lease started in 2021.  So do I need to pay taxes on this rental income in 2020 or in 2021? Is there a way to show that the income was not actually received in 2020 ?

Thank you for any help.

[Carl]

First, your in service date for the rental is the first day a renter "could" have moved in. So if they could have moved in on or before Dec 31, 2020, then you need to include the SCH E in your 2020 tax return. Then it's no big deal to report the income as 2020 income.

[adityasaxena]

Hi Carl,

Thanks for the response. I guess the rental could have started in Dec  if the renter could have been found. So given that I need to file Schedule E to report this income, how do the deductions in Schedule E work ? Can I deduct the HOA etc and claim depreciation on property for one month (DEC) in 2020 ? Sorry if my questions seem confused - I'm doing this for the first time.

Thank you.

[Carl]

I guess the rental could have started in Dec

There's really no guessing here. The property is "in service" on the first day the property is available for rent - meaning that if on Dec 1 I walked up to you with the deposit, first months rent and last months rent and you accepted it (or would have accepted it) with the understanding I was moving in that very day, then the property was available for rent on Dec 1 of the tax year. Doesn't matter if it actually sat empty from the date it was "available for rent", through the end of the tax year. Generally, the day the property is considered "in service" and available for rent, is the day you put the FOR RENT sign in the front yard.