Deferred Rent Tax Treatment for Accounting under Current GAAP

There has been much discussion around the deferred rent tax treatment under current GAAP (Generally Accepted Accounting Principles) in the context of real estate investment trusts (REITs). This discussion has included a discussion of the implications for REIT financial reporting arising from applying the Section 467 deferred rent rules to REITs, and it has also included a discussion of the potential impact of applying the Section 467 deferred rent rules to REITs on the timing of the recognition of rent expense under current GAAP. As a result, the accounting for rent expense embedded in the financial statements of REITs is inconsistent with the accounting for rent expense embedded in the financial statements of REITs when the deferred rent rules are not applied.

Recent regulations have required U.S. companies that allow employees to defer receipt of income by setting up salary deferrals or profit-sharing plans to treat these arrangements as taxable income for U.S. federal tax purposes. The rules require the earnings to be taxed when the plans are paid out, similar to a lump-sum distribution. This article explains how these rules affect various accounting transactions.

Home » Bookkeeping » Deferred Rent Tax Treatment for Accounting under Current GAAP

Jul 2, 2020
Bookkeeping by Adam Hill

The local bank approved the loan through their education subsidiary. In early 2009, I was laid off, and was approved by the education subsidiary for a loan deferment. In 2011, I was laid off again, and was denied a loan deferment, as well as a loan forbearance, and a reduced payment schedule.

Accounting guidance on escalating rent payments or rent holidays

I was on the phone with them several times, some Reps helpful and others not, then many very rude. In the end I lost track of time and my son was given negative reports on his student loans. Now I had called to make a payment on 10/31 and did so, but because it was a weekend it had to be made for 11/2 instead. The worst of it , My son had immaculate credit and he found this out when he applied for a mortgage.

Beginning in January it will be moved to Insurance Expense at the rate of $2,000 per month. The deferral was necessary to match the $12,000 to the proper year and months that the insurance is expiring and the company in receiving the insurance protection. I applied for a store credit card recently and was turned down because of my student loan. This was because of the “debt-to-income ratio.” My student loan debt is about three times higher than my yearly income.

What you will find, however, is that you will always be asked to pay rent one month or three months in advance, which gives rise to a prepaid rent situation. So, you’ll have a hard time finding a landlord who will let you pay rent in arrears. To deal with this timing anomaly, the company must record the amount of rent paid in advance that has not yet been consumed. Returning to the above example, if ABC paid the rent in May, it would record the $5,000 prepayment as current assets until the cost is actually incurred.

Sadly, prepaid rent is an exception to the deduct when you pay rule. If you pay $50,000 in June for a years’ worth of rent, you could only deduct seven months of that rent on December 31.

It represents an advance payment for a future benefit, so you’ll record it as an asset to the company. Part of your credit score is based on the amount of debt you have (and approval of a car loan also depends partly on your income relative to your credit obligations). And a student loan payment that is going to go up means both less cash available for a car payment and a higher debt load. If you are financially able to make payments that would decrease the balance, it might be wise to rethink your payment plan.

I told my son I would pay off his student loans, from the beginning. My son went into the ARMY and we had a POWER OF ATTORNY NOTORIZED at his bank, so I could take care of anything that was needed.but then I had financial difficulties. I sent in request and POA, but they said about a month later that it was not the correct paperwork.

ASC 842 FAQ: How to Account for Real Estate CAM Charges and Leasehold Improvements

They are balanced at the end of the company’s billing period, which can be monthly, quarterly, half-yearly, and yearly. Prepaid rent is shown as a current asset in the company’s balance sheet.{“@context”:”https://schema.org”,”@type”:”FAQPage”,”mainEntity”:[{“@type”:”Question”,”name”:”Does deferred rent exist under ASC 842?”,”acceptedAnswer”:{“@type”:”Answer”,”text”:” No, deferred rent does not exist under ASC 842.”}},{“@type”:”Question”,”name”:”Is Deferred rent GAAP?”,”acceptedAnswer”:{“@type”:”Answer”,”text”:” No, deferred rent is not a recognized accounting concept.”}},{“@type”:”Question”,”name”:”How do I record deferred rent expense?”,”acceptedAnswer”:{“@type”:”Answer”,”text”:” You record deferred rent expense by recording a liability for the amount of the rent that is not yet paid.”}}]}

Frequently Asked Questions

Does deferred rent exist under ASC 842?

No, deferred rent does not exist under ASC 842.

Is Deferred rent GAAP?

No, deferred rent is not a recognized accounting concept.

How do I record deferred rent expense?

You record deferred rent expense by recording a liability for the amount of the rent that is not yet paid.