As a rental property owner, you routinely complete a number of reports related to your property and income. Whether you rent a single room in your home or own a multiunit rental facility, you likely complete forms that require you to understand and calculate your gross rental income.
What the Term Means
At the highest level, gross rental income is simply the amount you collected in rent and any related funds from your rental properties. The gross amount is the amount you received before deducting any expenses like insurance, maintenance, taxes, homeowner association fees and advertising costs. If you rent a room in your home, for example, gross rental income is the amount you receive in rent each month. If you rent several units, by contrast, gross rental income is the sum of all the rent payments and related income you received.
Gross income is significantly different from net income. Net income is the amount you received after deducting mortgage payments, repairs, maintenance and other rental-related expenses.
Other Income Sources
Though gross rental income primarily includes money you collect in rent, other revenues may comprise a portion of the final figure. According to the Internal Revenue Service, any expense paid by the tenant but not required in the lease is considered rental income. Similarly, if a tenant performs work on the property, the IRS considers the fair market value of this work rental income. If you charge any fees, like pet fees or gate access fees, the fees you collect are also part of your gross rental income. For tax purposes, you must also report any advance rent you receive as gross rental income.
Do not include security deposits in your gross income, as these funds belong to the renter. Only consider security deposit as income if you must keep some or all of the deposit to cover expenses.
Calculating Actual Gross Rental Income
To calculate actual gross rental income, refer to your bank statement, ledger or income journal. Simply add all rent payments and related income to a single total. You can calculate gross rental income for a month, quarter, year or any other period. People who rent properties by the day or week may want to calculate gross rental income on a weekly basis.
Use this method for reporting gross rental income in practical applications, such as preparing taxes, income statements and performance reports.
Calculating Forecast Gross Rental Income
In some cases, as when you're applying for a loan, it may be necessary to forecast gross rental income. According to Fannie Mae, you can forecast by estimating your gross rental income for the year and multiplying the result by 0.75. This formula allows for times when the rental property might be unoccupied.