Tax on Earnest Money or pre-closing rent

[jamiebrakken]

Hi have a 2024 real estate contract as Seller where buyer released non-refundable Earnest Money now, and agreed to pay monthly market rent until a specified date in 2025 where the property purchase will close.

Is the released earnest money taxable for 2024 income? Or is it just part of the future transaction that will close in 2025?

Is the 4 months pre-closing rental income taxable, or is it just part of the contract  which closes in 2025?

Is deducting selling expenses that are part of the contract, but were paid in 2024, deferred until 2025 taxes since that's when contract closes?

[tagteam]

The earnest money (escrow deposit) is not reportable income (at least not at this time).

Calendar year taxpayers report income in the tax year it is received and expenses in the tax year the expenses are paid.

[tagteam]

Unless there is a provision in the sales contract to the contrary, the rental income is reportable in the year you receive it (2024).

[jamiebrakken]

Thank you for answering. Your time is appreciated. 

[jamiebrakken]

Thanks TagTeam - it is appreciated