Skip to content

Is Rental Income Taxable?

house with lawn

“If we rent out our church building, is that taxable income?”

First, it’s important to determine whether the rental activity itself is substantially related to your tax-exempt purpose and mission. If it’s related, the income is tax-exempt.

If the rental activity is not related to your mission, then the rental income would be taxable in these situations:

  1. If more than 50% of the rent is for the use of personal property (vehicles, furniture, and equipment for example), all of the income is taxable, even the real property portion. If more than 10%, but less than 50%, is for personal property, then a portion of the rent will be taxable.
  2. If the property has a mortgage and the lessee is renting out more than 15% of the square footage, then the income is taxable because it is debt-financed income.
  3. If personal services are provided to the lessee, those are always taxable.

If the income is taxable and gross revenue is over $1,000, your church will need to file IRS Form 990-T and the related state form.  

Would you like to learn more?

Join our email list to receive our most recent blog posts, notification of upcoming seminars, and access to new resources!

Stay Connected
More Updates

Fraud Prevention for Small Business

Unfortunately for many small businesses, the “F” word has become increasingly common.  It’s a word that’s painful to hear, and a word that should definitely be avoided in a respectable

Estate Planning and Income Tax: Have a Plan

As of 2022, the current estate tax exemption is $12.06 million, allowing many to disregard concerns with federal estate tax. Compared to a decade ago, when planning was focused on