Utility Income for Rental Property Taxable?

Forum|Forum|3 years ago
April 15, 2023
2 replies
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I have a rental property. Per the terms of the lease the tenant is responsible for the payment of the utilities. The tenant was supposed to setup the accounts in her name and start paying. However, she neglected to do so. So I ended up paying her water bill twice as it auto charged me. She then later re-imbursed it back to me. Now that I got my 1099-MISC, it is showing up as Other Income.

So how does this work when it comes to my taxes. I don't think this should be considered a taxable income as it the tenant is reimbursing me for something that they owed. Or is it? When I submit my 1099misc in Turbotax, it says the following:

We noticed this 1099-MISC has income that doesn't belong to your rental property

Your 1099-MISC has a value in box:

Box 3 - Other Income $162.85

We'll move this form to the 1099-MISC income section for you.

Once you've finished adding your rental property info, you'll need to review all 1099-MISC income, as well as anything marked Needs review.

As if it is adding that value to my total taxable income. Any ideas if this is how it has to be or can i find a way to remove it?

TurboTax Premier Online

leeloo

It is technically income because she paid you. However, it is also an expense to you because you paid it in the first place. The expense zeros out the income. You paid, she paid you back, so that zeros out too.

KrisD15

Only rent can be entered on Schedule E.

I would argue that the management company should have included that in Box 1 with rent.

But they didn't.

The Utility Expense (162.85) WILL be reported on Schedule E.

The income will be on Schedule 1 as "Other Income". Make sure you select that it was not received as a means to "make money", that it was NOT like your job and that you only received in in 2022 so that the program does not try to get you to file Schedule C as a Self-Employed Taxpayer.

"Other Income" is taxable, but not subject to Self-Employment tax.

The result will be the same as if you reported it all on Schedule E as long as it doesn't generate a Passive Loss for the rental which would not be allowed to offset the income on Schedule 1.

Explain to the management company that this should have been included in Box 1 with rent since utility expense is a component of rent.

You did not sell them a product or service.

I'm sure it was an honest mistake, but since this is their job, the management company should handle reporting 1099-MISC properly.

@skim32

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