Income property refers to gain or profit received through the use of real estate. The three main types of income property are income obtained through rental income; income obtained through the use of a property as a lender’s security; and income obtained through the use of land as a tenant-in-common. Income property is usually taxable, though there are exceptions for rental properties and tenant-in-common properties.
Rent is the most common type of income property and includes both owner-occupied and tenant-occupied properties. Owner occupied property includes apartment buildings, condominiums, mobile homes, and farmhouses. Tenant-occupied property is property that is owned and used by two or more people who share the expenses of living and paying for the property. The expenses of paying rent include food, shelter, and clothing. Income from tenant-occupied properties may be tax exempt and may be used as a rental expense on the person who pays the rent.
Land is the most valuable form of income property and is most commonly used in commercial ventures. The type of land that is used as the base for other business activities, though, can be a factor in determining which property is taxable. The value of residential, commercial, or industrial real estate can be determined in several ways. The value of the structure can be compared to surrounding structures. If there is more structure around a piece of real estate than it actually costs to build, it will be more valuable. Real estate appraisals can help determine the value of properties.
Other types of income property can be profit property or rental property. Profit property refers to land, buildings, and personal property that makes profits for the individual who owns it. Real estate that is developed and sold is considered profit property. Income from rental property includes the payments made to the owner for the use of the property and any income from rental fees paid to the landlord. Income from land is not taxable, however, if the individual uses it primarily for personal use.
Investment property refers to any property that produces a profit and may be sold. There are several types of investment property that can be used for such purposes as businesses, farms, or even personal residences. Many real estate investors buy a property only to resell. The profits from these real estate sales are reported as part of the individual’s income and are taxable. when the person’s return on the investment is computed.
The different types of income property have many rules and limits that apply. For example, rental income and interest income are usually not subject to personal exemptions. Interest is subject to an applicable tax rate, but if the person receives it from a bank account, this may be subject to the lower tax rate applicable to the bank account.
Property that is not held for rental purposes is called land, buildings, and personal property. Personal property includes personal assets such as cars, boats, and other personal items used as assets, as well as cash, checks, bonds, and stocks held for investment purposes.
Tax laws that pertain to income property also vary with the type of property being used as a basis for taxation. Real estate that is leased out can be subject to the full property tax, or the part of the property tax that the rental property owner pays. Real property that is used for business purposes such as office space, warehouse, storage facility, or even a home, may not be subject to state tax.
Taxing rules that pertain to income property can also be different for different types of business. For example, some types of business that deal in commodities are subject to the commodity income tax, while others are not. This tax is usually based on the amount of money received and must be refunded to the person who received it. Other types of business are exempt from the commodity income tax, such as farming, manufacturing, and certain types of trade.
There are also rules that relate to the types of income property that can be used for business purposes. Most business are required to report all the income and expenses on an annual basis for tax purposes. However, there are exceptions, and these include certain types of non-profit organizations, charities, and certain types of private schools.
Income property is defined by the Internal Revenue Code. Income property is also called income, and is any income that you receive before subtracting your expenses.