Hello, everyone
If I do lease options how do I report any income earned when I either sale the property to the tenant buyer or flip to another investor, or is this type of income non taxable. I understand the option consideration money is not reported. Just wanted to ask this question,
Thank you
You want to acquire real estate to resell for a profit. You want to use a lease option to facilitate the sale. Your question is how will you report your income to the IRS.
Generally (in the absence of a business entity), you report your income to the IRS on Schedule C and compute your self-employment income tax on Schedule SE.
Contrary to what you may have been told, the option consideration is taxable income. However, it is not realized until the option is exercised or the option expires. So, you don’t need to report the option consideration when you receive it, just when the property is sold to your tenant buyer or the option expires.
Best to consult a tax professional licensed in your state for specific details.
Thank you for your response, Dave T