Lease Contract: Tax issues for landlords

Some people opt to lease the property instead of buying it because of insufficient resources. In most of the cases, it requires less cost and very few risks are linked to it; therefore, it is convenient for some people to lease the property instead of owning it. Although the law allows you to rent any property on a verbal contract, to avoid lots of confusion and potential problems, it is essential to write a lease agreement on a paper. Lawyers usually write lease contracts, and these are the standard documents that can also be written without any professional legal advice. While renting property, you have to understand the tax issues for landlords.

Guidelines to Write Lease Contract 

The law for the lease of property may vary by state; therefore, it is essential to find the rules and regulations of your country while writing a lease contract. Following are some standard guidelines that will help you to write a perfect lease contract:

• It is important to start writing with generic lease and follow the rules and regulations of your state while writing a lease contract. Keep the judges and lawyers in your area informed about the lease to ensure legal enforceability.
• Properly describe the leased property to avoid any confusion and troubles in future. Write the address of the leased property with all relevant details for your own protection. It will be good to give thoughtful information and a brief description of the property to avoid any confusion. The condition of the property should be adequately described, and you can attach a detailed document with the lease contract.
• Describe essential details of the parties involved in the lease contract. Although the name and address of the lessor are enough, you can write the social security number, driver’s license and other vital details for added security.
• Write the rent of the properties and specify the accurate information on the amount of rent due, where and how it should be paid and the penalties for the late payment. Follow generally accepted practice to write the received practices and write the terms and conditions according to the law of your state to legally enforce the parties.
• Write the details of security deposits and general claims to them. The landlord will get the right to make claims against the security deposit, but this will be done under the instructions of the state laws. It will be good to consider the relevant state laws before writing anything.
• Write the responsibilities of landlords including repair of fixtures, installation of necessary equipment and appliances, cable connections, garbage pickup and payment of utilities. The lease should address all responsibilities of the landlord to avoid any confusion.

Common Mistakes in Lease Contract

Keep language simple and easy to write your lease, because any vague term or statement can be challenged in the court and the table will be turned against you.

• Do not forget to consult legal personnel while writing your lease, because the legal person or accountant may work in your favor.
• Get witness for the contract and get your lease signed on right time from all required person to make it legally enforceable. It helps you to get legal protection for your property. 

Tax Issues for Landlords

If you want to rent your property, it is essential to make your tax returns as per the laws of your state. You have to claim payments of TRS or submit outstanding tax returns. If you start making a profit from your rented property, your income is subject to tax. The sum of income tax paid on this amount is taxable income. If you are paying the tax at a basic rate, you will pay 20%. A higher taxpayer will pay 40% or even 45%. 

If you are eligible, you may get relief for income tax that means you will pay less tax for money. It is essential to understand that only profits from your renting income are liable for taxes. You have to calculate profits to avoid tax issues. Revenue expenses linked to regular maintenance and running of property may offset against your tax bill. Tax issues for landlords can be avoided by consulting a professional attorney or accountant.