Rental income is one of the most important parts of real estate. What many landlords may not realize is that there are several ways to make rental income beyond just collecting rent checks.

Rental income comprises more than just direct income from tenants. Here’s what you should know about the different types of rental income and how it is taxed.

What is Rental Income?

Rental income is the payment for the occupation or use of your property. You’ll report rental income for all of your properties.

• Advance rent: Any amount you receive before the period that it covers. 
• Canceling a lease: This is rental income if your tenant pays you to cancel a lease. When you receive the income, you’ll include it in the year received regardless of the accounting method.
• Expenses a tenant paid (You can deduct the expenses if they’re deductible rental income)
• Property services: You’ll add the fair market value of the property or service as the rental income amount. 
• Security deposits: Security deposits used as a final payment of rent are advance rent. You should include this in your income when you receive it. 

There are additional ways that you may earn rental income: 

• Lease with option to buy: If your rental agreement allows your tenant to buy your rental property, the payments you receive are rental income. 
• Part interest: If you own a part interest in your rental property, it is rental income.

• When Do You Pay Taxes on Rental Income?

  The deadline to pay rental income taxes is the same as other taxes. This means you’ll have the same deadlines to submit taxes due for rental income as other taxpayers. 

  How to Calculate Rental Income

  To determine how much you’ll owe in rental income taxes, you’ll complete Part I, Income or Loss From Rental Real Estate and Royalties.