Tenant's improvements not taxable to landlord

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I own a house which I rent to a family. My tenants have put some
money into the house in the way of painting, resurfacing some walls, and
building a small deck. Do I have to show the value of these improvements as
income on my tax return?

K.Y., Indianapolis

If your tenants made the changes to your house using their own money, the cost of improvements to the house is not taxable to you, even though your house is now presumably worth more money. Likewise, when the tenants move out, there is no additional income to you for the amount of the improvements. If, however, you gave your tenants a break in the amount of rent owed as a result of the cost of the improvements, you will have to recognize rent income in the amount of the rent reduction. By the way, even though the value of your house has increased, the amount of depreciation you claim on the house will not change due to the improvements.

I sold a vintage car for a substantial gain and
realize I will have to pay tax on the profit I made. The catch is that I signed
a contract to receive the income payments over three years. I don't feel there's
any risk that I won't get the money, but do I have to pay tax on the entire
income this year since I signed the contract this year? E.R.,


There's a special tax form just for your situation. It's Form 6252, "Installment Sale Income." You should show the sale of your car on this form, showing the total amount for which you agreed to sell the car. You will calculate the amount of the gain, or profit, that you made on the sale. Then, you will show how much money you received in 1998. When you work through this form, you will see how much of this year's money represents a portion of your taxable gain, and that is the amount on which you will pay tax for 1998. Next year, and the year after, when you receive the rest of the payments on the contract, you will continue to include a Form 6252 with your tax return, showing the amount of money you received in the current year, and calculating the portion of the taxable gain that results from the money received. This way you are only liable for tax on the gain in the year in which you actually receive the money, instead of all up front.

I have been teaching adult continuing education
classes for several years, and now I have the bug to teach in an actual school
setting. I will need to go back to school and take some courses so that I can
get a teacher's certificate in order to qualify to teach in a high school. Will
I qualify for a deduction for my school costs?

S.K., Indianapoiis

You' re in luck! There are several strict rules regarding the right to take a deduction for education costs, and one of the main obstacles to claiming a deduction is this: If your return to school qualifies you for a new profession, you can. t take a deduction for the costs. There is precedent, however, for deducting education costs in your situation, since your previous teaching experience is considered the same profession as the teaching for which you hope to qualify. In other words, since you're already a classroom teacher, the training you need to get your teaching certificate isn't qualifying you for a new profession.,you will be involved in the same profession, only in a different setting.

I remember I used to be able to take a
contribution deduction for money I gave to political candidates. Is this
deduction still available?

C.J., Indianapolis

The right to take a deduction for political contributions was removed several years ago. Your contributions to political candidates are now given completely out of the goodness of your heart, with no help from the IRS.


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