Is December rent paid in January income for this year or next?
For a landlord on the cash method, rent is income in the year you receive it, not the year it was due. December rent that a tenant pays in January belongs to the new year. Rent you could actually collect in December, such as a check in hand, is generally income in December even if you deposit it later.
The cash method rule
IRS Publication 527 says that if you use the cash method, you generally report rental income on your return for the year you actually or constructively receive it. Constructive receipt means the money was made available to you without restriction, even if you have not taken it yet.
Example a made-up tenant owes $1,300 due December 1. They pay by bank transfer on January 3. A calendar-year landlord on the cash method reports that $1,300 in the new year, not the year it was due.
Most small landlords report on the cash method, but some use accrual, where income counts when it is earned. Ask your preparer which applies to each LLC. The comparison is in cash vs accrual for rentals.
The edge cases around December 31
| Situation | Likely treatment on the cash method |
|---|---|
| Tenant pays December rent on January 3 | Income in the new year |
| Check handed to you December 30, deposited January 2 | Generally income in December: you had it |
| Bank transfer sent December 30, arrives January 2 | Income when the funds are received, so the new year. Confirm the bank date. |
| January rent paid on December 28 | Income in December. It is advance rent. |
Advance rent is income in the year you receive it, whatever period it covers. The details are in advance rent and the tax year. The bank date on your statement is the best evidence of when a transfer arrived, so use the posted date from the bank feed and not the date the tenant says they paid.
Edge cases like these depend on the facts. Ask your preparer if a large amount falls near December 31.
What about the rent still owed?
Two views of the same money matter at year end. For tax on the cash method, unpaid December rent is not income yet. For managing the building, it is still owed. Your tenant ledger shows the balance as a receivable, and it is part of your delinquency number.
Example of $10,000 of rent due in December, $9,300 arrived by December 31 and $700 came in January. Cash method income for the year includes $9,300 of that month. The remaining $700 is income next year, and still shows as owed on the tenant ledger on December 31.
If a tenant never pays, you do not get a deduction for rent you never counted as income on the cash method. See deducting unpaid rent.
A short year-end check
- Run the tenant ledgers for December 31 and list who still owes rent.
- Look at deposits dated December 28 to January 5 and decide which year each belongs to by the date the funds were received.
- Look for rent that covers next year, such as January paid in December.
- Send your preparer the list with the dates. Use it with the rest of the year-end close checklist.
How DoorKeeping handles it
DoorKeeping matches bank deposits to tenants by the date the bank posts them, so the books follow the bank statement. Ask Claude or ChatGPT for the delinquency report as of December 31 and for a tenant's ledger to see what is still owed. Month-end close locks each month once you approve it. Tenants pay your own bank account, not DoorKeeping. It gives no tax advice, so confirm cash or accrual treatment with your preparer.
Sources
Questions
- Is rent income when it is due or when it is paid?
- On the cash method, when you receive it. On accrual, when it is earned. Most small landlords use the cash method.
- Does the deposit date or the payment date matter?
- Receipt matters. A check you held in December is generally December income. For electronic transfers, use the date the funds arrived.
- What about rent paid early for next year?
- Advance rent is income in the year you receive it.
- Do I report unpaid rent as income?
- Not on the cash method. You report it in the year it is paid.