topic Is Cash for Keys deductible by a landlord? in Investors & landlords

Is Cash for Keys deductible by a landlord?

arrowhead44 — Sun, 14 Mar 2021 01:03:25 GMT

I sold my three-unit residential rental property in California in 2020. As a condition of the sale, the buyer required me to provide him with a vacant unit for him to move into. In order to entice the tenant of the unit to move out, I offered her a substantial amount of cash to vacate. In California, this is permissible by law under a program known as Cash for Keys.

Now that the property has been sold, am I allowed to deduct the cash payment on my federal and state tax returns as an expense relating to the sale of business property?

Re: Is Cash for Keys deductible by a landlord?

Carl — Sun, 14 Mar 2021 02:21:36 GMT

Now that the property has been sold, am I allowed to deduct the cash payment on my federal and state tax returns as an expense relating to the sale of business property?

Yes, provided it's cash that you reported as income (in any tax year) and paid taxes on already.

In other words, you would "not" reduce your rents received for the year, by the amount of cash you paid the tenant to move out.

Re: Is Cash for Keys deductible by a landlord?

arrowhead44 — Sun, 14 Mar 2021 21:19:19 GMT

Thank you, Carl