Tax slabs on income earned from rented property in Alabama
All transactions are part of the growing economy. So whenever any kind of transaction takes place it is not just the duty of the buyer to pay taxes to the government. Even the seller i.e the lessor is subjected to some taxes for the income generated from his service.
Rental tax or Leasing is a tax charged by the government on the person lending a property. Therefore the amount of money the lessor earns by renting the different properties is taxable by law though the percentage may vary.
The same rental tax is applied to the lessors in the state of Alabama. This means that property of any kind, be it housing, automobiles, linen/garments, etc when leased, is taxable.
The percentage of tax on different transactions that should be added as state rental tax is as follows:
- Automotive vehicles – 1.5%
- Linens/Garments – 2.0%
- Other – 4.0%
According to the state laws, this tax is taken on true leases. True leases are those in which the property will remain with the lessor after the term agreement or the lessee will have the chance to buy the property at a fair market price.
Sales Tax or Rental Tax?
When the property is conditioned as a part of the lease agreement to be sold off to the lessee at an agreed value, the contract is not a true lease agreement. It is called a conditional sales agreement. In such cases even if the property has been rented out, rental tax is not applied. Instead, the sales tax is applied to the property.
When a property is leased but still is being operated and used by the lender and their employees, the property will be subject to a sales tax and not a rental tax.
When and How to pay?
Every month before the 20th, the lessor in the state of Alabama is due to lay the monthly rental tax of the previous month to the government. However, the monthly rental payment can be collected together and can be paid as a quarterly state rental tax when the total amount of the due rental tax is less than 200 USD per month in the previous calendar year.
The quarterly tax file returns can be arranged by writing a letter to the Alabama Department of Revenue before the 20th of February every year.
The regular tax payments can get confusing for people with multiple properties to lease. A tax consultation firm can, therefore, be helpful in the timely payment of the different taxes.
The Accounting and Tax company is an online US tax consultant. It provides a personal tax consultancy service and helps people pay the government within the due date to not incur any kind of fine.
The firm is an international tax consultant in Alabama and deals with all the filing and accounting of different businesses and even personal property. Clients can be sure of the high quality of service guaranteed by the experienced professionals at the firm.
