Renters broke their lease, what do I enter for time rented?

HSC1 · ‎June 1, 2019

My renters broke their lease, and it took several months to get new tenants - the whole duration for which the original tenants were under contract. They didn't pay me anything for their missed time, and I'm taking them to court to recover damages, but that could take years. In the meantime, do I consider that to be "time rented at a fair rental price" or "not rented"? If I recover some of the money I'm owed in court, would I pay taxes on it in the year recovered?

DanaB · ‎June 1, 2019

Yes, if you recover some money in court it would be included in your income the year you received it. As long as the rental continues to be available for rent it would be considered to be rented at a fair rental price for the year.

From Publication 527 (2018), Residential Rental Property:

If you hold a property for rental purposes, you may be able to deduct your ordinary and necessary expenses (including depreciation) for managing, conserving, or maintaining the property while the property is vacant. However, you can't deduct any loss of rental income for the period the property is vacant.

View solution in original post

DanaB · ‎June 1, 2019

Yes, if you recover some money in court it would be included in your income the year you received it. As long as the rental continues to be available for rent it would be considered to be rented at a fair rental price for the year.

From Publication 527 (2018), Residential Rental Property:

If you hold a property for rental purposes, you may be able to deduct your ordinary and necessary expenses (including depreciation) for managing, conserving, or maintaining the property while the property is vacant. However, you can't deduct any loss of rental income for the period the property is vacant.