--- title: Lease-Option Deals And Income Taxes description: Unlike traditional rent or purchase agreements, the lease-option deal offers investors and tenants little in the way of obvious tax benefits. image: https://blog.homesandland.com/hubfs/Imported_Blog_Media/ArticleThumb_Lease.jpg --- [![Homes & Land](https://blog.homesandland.com/hubfs/Images/hnl-logo.svg)](https://www.homesandland.com/) - [Homes](https://www.homesandland.com/homes) - [Rentals](https://www.homesandland.com/rentals) - [Agents](https://www.homesandland.com/agents) - [Commercial](https://www.homesandland.com/commercial) - [Open houses](https://www.homesandland.com/open-houses) - [Land](https://www.homesandland.com/land) - [Mortage](https://www.homesandland.com/mortgage) - More [Rentals](https://www.homesandland.com/rentals) [Agents](https://www.homesandland.com/agents) [Commercial](https://www.homesandland.com/commercial) [Open houses](https://www.homesandland.com/open-houses) [Land](https://www.homesandland.com/land) [Mortage](https://www.homesandland.com/mortgage) - [Log in](https://www.homesandland.com/account) - [Blog](https://blog.homesandland.com) - [Advertisers](https://advertise.homesandland.com/advertise) [How a Realtor Makes Home Buying Easier](https://blog.homesandland.com/how-a-realtor-makes-home-buying-easier) Buying a home is one of the most significant financial decisions you’ll ever make, but the process... [Read More](https://blog.homesandland.com/how-a-realtor-makes-home-buying-easier) [13 Cities That Will Pay You To Move There](https://blog.homesandland.com/13-cities-that-will-pay-you-to-move-there) The physical act of moving is often a hassle. But starting over somewhere fresh and new can be... [Read More](https://blog.homesandland.com/13-cities-that-will-pay-you-to-move-there) [5 Benefits Of Living In The Countryside](https://blog.homesandland.com/5-benefits-of-living-in-the-countryside) Are you over the hustle, bustle, and cost of city living? What draws us somewhere at one point in... [Read More](https://blog.homesandland.com/5-benefits-of-living-in-the-countryside) [5 Questions to Ask Your Realtor When Selling Your Home](https://blog.homesandland.com/5-questions-ask-realtor-when-selling-home) If you’re like most home sellers, you probably already know that [working with a realtor](https://blog.homesandland.com/need-realtor-help-sell-home-top-dollar) can mean so... [Read More](https://blog.homesandland.com/5-questions-ask-realtor-when-selling-home) [10 Step Guide to Selling Your Home](https://blog.homesandland.com/10-step-guide-selling-your-home) Ready to put your home on the market? Many people hope for a stress-free sales process, but the... [Read More](https://blog.homesandland.com/10-step-guide-selling-your-home) [Home](https://www.homesandland.com/) [Homes & Land Blog](https://blog.homesandland.com) > Lease-Option Deals And Income Taxes --- # Lease-Option Deals And Income Taxes ![ArticleThumb_Lease](https://blog.homesandland.com/hubfs/Imported_Blog_Media/ArticleThumb_Lease.jpg)Unlike traditional rent or purchase agreements, the lease-option deal offers investors and tenants little in the way of obvious tax benefits. How do these agreements work tax-wise and what pitfalls should you avoid? During the course of the lease, the tenant is still the tenant. Until he buys the property from the landlord – who applies the lease-option fee and the rent premium (or credit) toward the purchase – he cannot deduct monthly rent payments from his income taxes (unlike mortgage interest and property taxes). Since many tenants never consummate the sale, they wind up forfeiting the option fee and the rent premium, both of which are nonrefundable. However, if you use a corporation to purchase a lease option – then sublease the home to yourself but don’t complete the sale – the corporation can take the option and rent premium money it paid to the landlord as a capital loss. Landlords have an easier time earning tax benefits. If a landlord sells his personal residence using a lease option, then he may exclude up to $250,000 of the gain on his income taxes (the Internal Revenue Service raises this limit to $500,000 for married owners). Note, however, that the IRS considers some investors as dealers, which significantly alters tax treatment. Make sure that your lease-option deal is actually a lease-option deal and not a disguised sale. In other words, the price of the home should stay the same over the course of the lease. If the purchase prices decreases over a long period of time – and the tenant can purchase the home for a nominal amount at the end – that could spell tax trouble. Finally, both landlord and tenant should work with local, reputable professionals with experience in lease-option tax treatment . Ask a local Homes & Land [real estate agent](https://www.homesandland.com/sitemap/agents) any questions you may have about [home buying](https://www.homesandland.com/), or check out homes for sale. Learn something new? Want to pass an idea to a friend? Share the knowledge with your network! ![Share to your network!](https://blog.homesandland.com/hubfs/Homes_And_Land_October2018%20Theme/Images/share-arrow.png) [Buying a Home](https://blog.homesandland.com/tag/buying-a-home), [Renting a Home](https://blog.homesandland.com/tag/renting-a-home) ### Select a Category - [Buying a Home (83)](https://blog.homesandland.com/tag/buying-a-home) - [Real Estate Marketing (49)](https://blog.homesandland.com/tag/real-estate-marketing) - [Selling a Home (38)](https://blog.homesandland.com/tag/selling-a-home) - [Home Ownership (30)](https://blog.homesandland.com/tag/home-ownership) - [Articles (21)](https://blog.homesandland.com/tag/articles) - [Featured (20)](https://blog.homesandland.com/tag/featured) - [Renting a Home (12)](https://blog.homesandland.com/tag/renting-a-home) - [The buying journey (11)](https://blog.homesandland.com/tag/buying-journey) - [Building a home (10)](https://blog.homesandland.com/tag/building-a-home) - [For Agents (10)](https://blog.homesandland.com/tag/for-agents) - [Home Improvement (8)](https://blog.homesandland.com/tag/home-improvement) - [Home Values, Credit & Mortgage (8)](https://blog.homesandland.com/tag/credit-and-mortgage) - [Interior Design (8)](https://blog.homesandland.com/tag/interior-design) - [Landscaping and Gardening (5)](https://blog.homesandland.com/tag/landscaping-and-gardening) - [The selling journey (5)](https://blog.homesandland.com/tag/the-selling-journey) - [real estate agent (5)](https://blog.homesandland.com/tag/real-estate-agent) - [Loans (4)](https://blog.homesandland.com/tag/loans) - [real estate (4)](https://blog.homesandland.com/tag/real-estate) - [Blog Posts (3)](https://blog.homesandland.com/tag/blog-posts) - [Credit (3)](https://blog.homesandland.com/tag/credit) - [Financing (3)](https://blog.homesandland.com/tag/financing) - [Mortgages (3)](https://blog.homesandland.com/tag/mortgages) - [architecture (3)](https://blog.homesandland.com/tag/architecture) - [Housing Market (2)](https://blog.homesandland.com/tag/housing-market) - [Taxes (2)](https://blog.homesandland.com/tag/taxes) - [home buying journey (2)](https://blog.homesandland.com/tag/home-buying-journey) - [Company News (1)](https://blog.homesandland.com/tag/company-news) - [Foreclosures (1)](https://blog.homesandland.com/tag/foreclosures) - [Infographics (1)](https://blog.homesandland.com/tag/infographics) - [Negotiations (1)](https://blog.homesandland.com/tag/negotiations) - [Videos (1)](https://blog.homesandland.com/tag/videos) See all - Helpful Links and Resources: - [GET HELP From a real estate professional](https://www.homesandland.com/agents) - [VIEW Digital Magazines](https://www.homesandland.com/magazine) - [ORDER Homes & Land](https://www.homesandland.com/magazine) - [RESEARCH Local Mortgage Rates](https://www.homesandland.com/mortgage) - [ADVERTISE In Homes & Land](https://advertise.homesandland.com/advertise) #### [![real estate infographics](https://blog.homesandland.com/hubfs/Homes_And_Land_October2018%20Theme/Images/finger.png) Interactive Infographics - Home Improvement - Real Estate](https://blog.homesandland.com/tag/infographics) ## SIGN UP FOR EMAIL UPDATES ## Recently Added ## [How a Realtor Makes Home Buying Easier](https://blog.homesandland.com/how-a-realtor-makes-home-buying-easier) Buying a home is one of the most significant financial decisions you’ll ever make, but the process can be overwhelming. From finding the right property to… [Read More »](https://blog.homesandland.com/how-a-realtor-makes-home-buying-easier) ## [13 Cities That Will Pay You To Move There](https://blog.homesandland.com/13-cities-that-will-pay-you-to-move-there) The physical act of moving is often a hassle. But starting over somewhere fresh and new can be super exciting. The downside? The cost. Unless you have an… [Read More »](https://blog.homesandland.com/13-cities-that-will-pay-you-to-move-there) ## [5 Benefits Of Living In The Countryside](https://blog.homesandland.com/5-benefits-of-living-in-the-countryside) Are you over the hustle, bustle, and cost of city living? What draws us somewhere at one point in our lives can easily change over time. As many people… [Read More »](https://blog.homesandland.com/5-benefits-of-living-in-the-countryside) - [Sitemap](https://www.homesandland.com/sitemap) - [Terms of Use](https://www.homesandland.com/terms-of-use) - [Privacy Policy](https://www.homesandland.com/privacy-policy) - [About Us](https://www.homesandland.com/about-us) - [Contact Us](https://www.homesandland.com/contact-us) - [Partners](https://www.homesandland.com/partners) © 2026 NewPoint Media Group, LLC. All Rights Reserved. Fair Housing and Equal Opportunity