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Is There a Fair Rental Value on My Rental Property?

Rental property, also called let or renting, is an arrangement where an allowance is paid for the personal use of another's property, service or good. Generally, a full gross rent is the amount that the tenant pays directly to the owner and the landlord pays for all property expenses regularly incurred by both the owner and tenant. When renting, both parties agree on the rate, duration and location of the property. In some cases, the tenant can occupy the property as an occupant for a fixed time frame only, such as two months, while the owner may be allowed to occupy the property as the exclusive tenant for a specified period only, such as a year. Check it out at http://libertyproperties.info for more information about property management.

The Internal Revenue Service has published the following guidelines relating to rental properties. The publication provides the definition of the terms "unauthorized occupant," "affirmative notice," and "absentee tenant." For the purposes of calculating rental expenses, the taxpayer must treat all references to a particular period of occupancy or a specific period of occupancy as references to the entire rental period. Similarly, references to a specified day of any vacation shall be treated as references to the entire rental period. Likewise, when referring to the taxpayer's deductible expenses, the taxpayer must include all rental expenses, including those associated with occupant occupancy and other related expenses.

The following are examples of Rental Income. Personal Use - Any personal use of the property by a qualified individual meets the requirements for earning this income. Such use can include repair to the property, servicing the property, and similar activities. If a home is rented for commercial purposes, the individual must include in his or her total rental income the fair market value of the property itself less the amount for any personal use. The fair market value is determined by deducting the expenses for improvement from the total rental income.

Self-Employment - Any employee who is employed directly by a taxpayer and receives all benefits from the activities of that employee must be considered a self-employed tenant for purposes of computing rental income. Likewise, an employer who pays an employee for services such as driving a vehicle, operating a building and furnishing it, and similar activities must include those expenses in computing his or her personal rental income. In addition, the personal use portion of the Self-Employment section must include all rental expenses, even if those expenses are paid directly by the employer. The Self-Employment section also requires that all income tax credits and allowable deductions apply to the self-employed individual's personal rental income.

Certain expenses are deductible solely because they relate to the personal use of the property. Mortgage interest is one such expense. Mortgage interest must be included in computing a taxpayer's rental income under the appropriate section of the tax code. Similarly, expenses paid to a custodian for the benefit of the individual who actually uses the property are deductible. Again, the appropriate tax code section will determine which expenses are deductible and which are not. Read more here about hiring the best property management company.

A few final considerations should be addressed before making a decision about the proper method of valuing a residential rental property. Rental income is affected by a variety of factors, including the location of the property, whether the property is a single family or multi-unit, and whether the property is located in a planned community or not. Taxpayers should consider the fair market value of the property as well as any similar property located nearby. Fair market value is generally established by using current prices for comparable properties in the same area. A taxpayer should take care to obtain documentation detailing the appraisal and its basis, so that he or she is properly informed regarding the property's fair market value. Here is an alternative post for more info on the topic: https://en.wikipedia.org/wiki/Property_management_system.

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