Although many areas of the country are still buried deep in snow or gloomy days of winter weather, April 15th (tax deadline day) is just a few short weeks away. And as Founding Father Benjamin Franklin warned, there are only two things we can be sure of in life – “death and taxes”.
So, there is no time like the present to roll up your sleeves and get started preparing yours. If you have a real estate rental, such as a corporate rental, there are several ways the IRS might view it based on how you use that rental.
What do we mean by that? Well, think of the different ways real estate rentals can be structured:
- It could be your primary residence that you rent out periodically throughout the year
- It could be your vacation home that you seek to monetize
- It could be a property you have purchased specifically to use as a vacation or corporate rental
- It may be a portion of a property that you use as a rental
No matter what, the IRS will need to be properly and fully informed about it. At CHBO, our handbook has offered a few basic tips about the way you might use your rental and how the IRS views it. And it is important to note two things:
- Changes in state and cities have started to make “under 30-day vacation rentals” very difficult to create or offer, and this is tremendously beneficial for the corporate rentals that usually have a minimum of one month or longer
- Typically “renting your personal residence is that for a home rented for less than 15 days in a calendar year (assuming a calendar year taxpayer which includes practically all individuals), the owner cannot deduct any of the related rental expenses, but isn’t taxed on any of the rental income”
Depending on how you, personally/familial use the corporate housing (if at all) and how many days in the calendar year it is rented, your tax situation will vary. A few simple guidelines to follow include:
- If you use it more than 14 days per year (personally) or more than 10% of the time it is rented, the IRS thinks of the rental property as a personal residence and you don’t need to report the income. You do NOT get to deduct it, though. The same applies if you rent it out less than 15 days per year.
- If you use it more than 14 days per year (personally) or rent it more than 14 days per year, the IRS thinks of the rental property as a personal residence and you need to report the income. You do get to deduct it, as well.
- If you use it less than 14 days or less than 10% of the days rented, the IRS views this as a corporate rental property and you must report income, but also get to deduct business expenses.
Keep in mind that you always want to discuss your specific business scenario with a tax expert to be sure you are making all of the right claims and benefiting the most from your business.
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- Tax Scenarios for Furnished Houses for Rent
- Are High Cost Vacation Rentals Profitable for Owners?
- Should Your Monthly Furnished Rental be a Weekly Furnished Rental Too?
- About the Independent Corporate Housing Real Estate Segment: Property Management Trends