Skip to main content

Do I have to pay rental income taxes on a building I am renting and plan to sub-lease to multiple parties?

Raleigh, NC |

I am planning to rent a building to make rooms available for rent to artists and musicians, etc. in the area. I will be renting it from one person and will have at least seven or eight rooms to rent out. It needs a lot of work before I can even think about rentals, but will I have to pay taxes on the rental rooms even though I am renting from someone else? What if the amount of money I use to restore it exceeds the amount of income I receive?

Attorney Answers 2


  1. Best answer

    Your subleasing income is reportable income and can be offset by the related expenses you incur. Note however that capital improvements must be capitalized and depreciated. You should speak with a tax attorney or a good tax accountant BEFORE you do anything.

    Hope this helps. Mr. Fromm is licensed to practice law throughout the state of PA with offices in Philadelphia and Montgomery counties. He is authorized to handle IRS matters throughout the United States. His phone number is 215-735-2336 or his email address is sjfpc@comcast.net . For further tax advice visit his website at www.sjfpc.com . and blog at >

    LEGAL DISCLAIMER Mr. Fromm is licensed to practice law throughout the state of PA with offices in Philadelphia and Montgomery Counties. He is authorized to handle IRS matters throughout the United States. His phone number is 215-735-2336 or his email address is sjfpc@comcast.net , his website is www.sjfpc.com. and his blog is <http://frommtaxes.wordpress.com/> Mr. Fromm is ethically required to state that the response herein is not legal advice and does not create an attorney/ client relationship. Also, there are no recognized legal specialties under Pennsylvania law. Any references to a trust, estate or tax lawyer refer only to the fact that Mr. Fromm limits his practice to these areas of the law. These responses are only in the form of legal education and are intended to only provide general information about the matter within the question. Oftentimes the question does not include significant and important facts and timelines that if known could significantly change the reply or make such reply unsuitable. Mr. Fromm strongly advises the questioner to confer with an attorney in their state in order to ensure proper advice is received. By using this site you understand and agree that there is no attorney client relationship or confidentiality between you and the attorney responding. This site should not be used as a substitute for competent legal advice from a licensed attorney that practices in the subject area in your jurisdiction, who is familiar with your specific facts and all of the circumstances and with whom you have an attorney client relationship. The law changes frequently and varies from jurisdiction to jurisdiction. The information and materials provided are general in nature, and may not apply to a specific factual or legal circumstance described in the question or omitted from the question. Circular 230 Disclaimer - Any information in this comment may not be used to eliminate or reduce penalties by the IRS or any other governmental agency.


  2. I would agree that you should get professional assistance. You will need to pay federal and state income taxes on your income after deducting expenses from the rental property. It sounds as if determining your income will be relatively easy, but remember that refundable deposits are not income, but advance rent is includible in the year received.

    The rent that you pay should be a currenlty deductible expense. There are also many other deductible expenses, including transportation costs, utlities, repairs, etc. However, any capital leasehold improvements that you make would be capitalized and deducted over the term of the lease. Not all costs must be capitalized and deducted over the lease term, many can be expensed currently. For example, if you paid an architect and paid a contractor to make structural improvements, such as moving or erecting walls, you would capitalize the architect's fees and the contractor's costs and deduct them ratably over the lease term. However, you should be able to deduct currently the cost of cleaning and painting a room. An experienced tax practitioner should be able to guide you through these decisions.

Real estate topics

Top tips from attorneys

What others are asking

Can't find what you're looking for?

Post a free question on our public forum.

Ask a Question

- or -

Search for lawyers by reviews and ratings.

Find a Lawyer

Browse all legal topics