Ah summer! Days soaking in the rays at your beach house. Or retreating from the heat at your cabin in the cool mountains. Or water skiing and fishing at your lakeside abode.
But even if you're fortunate enough to have a vacation home anywhere, you probably can't spend all summer there. So you rent it out when you're stuck at home.
That's generally a smart move. Just make sure, as the latest Weekly Tax Tip points out, you know and follow the tax rules on renting your second residence.
Here are some key tax points to keep in mind.
You usually report rental income and deductible rental expenses on Schedule E, Supplemental Income and Loss.
If you personally use your property and sometimes rent it to others, special rules apply. You must divide your expenses between the rental use and the personal use. The number of days used for each purpose determines how to divide your costs.
Depending
on your overall income, you also may be subject to the Net Investment
Income Tax (NIIT) on your rental income. NIIT is the new 3.8 percent tax that is effective this year as part of health care reform.
If you do have to report rental income on your vacation home, you can reduce it by claiming deductible expenses. Conversely, you also might be able to claim deductions for personal use — such as mortgage interest, property taxes and casualty losses — on Schedule A, Itemized Deductions, with your Form 1040.
If you do use your second home as a home, too, your rental expense deduction is limited. This means your deduction for rental expenses can't be more than the rent you received.
But if you rent your second home for 14 or fewer days, the very good news is that you don't owe any federal tax on the income.
Take note, though, of possible local taxes and fees for short-term rentals.
In addition to the information in the Weekly Tax Tip, you can find more about taxes and second home rentals in Internal Revenue Service Publication 527, Residential Rental Property (Including Rental of Vacation Homes).
Now get out there to your vacation home and enjoy these dwindling summer days!
Water skier photo courtesy Tate Johnson via Flickr CC
You also might find these items of interest:
Pilar
Everyone should know that if you receive rental income from renting a dwelling unit, such as a house or an apartment, you may deduct certain expenses. Basically, the amount of time you personally spend at your second home determines how much tax you might owe on rent, as well as deductions you can claim against the property. Lots of second-home buyers rent their property part of the year to get others to help pay the bills. Very different tax rules apply depending on the breakdown between personal and rental use. The best tax deal is for short-term rentals. If you rent the place out for 14 or fewer days during the year, you can pocket the cash tax-free.
internet marketing make money online
Do you mind iif I quote a few of your posts as long as I provide credit and sources bzck to your website? My blog site is in the very same niche as yours and my users would truly benefit from a lot of the information youu present here. Please let me know if this alright with you. Thank you!
Einah 29
This is a helpful information for many people like me to rent my house to others. Understanding legal terms can really help us a lot when it comes to leasing and renting.