Monthly Archives: October 2015

   Tax Tips for Your Rental Property or Vacation Home Rental

Owning a rental property is one way to boost your income and secure your financial landscape. You may also have a golden opportunity for some serious tax breaks.

Rental properties – both full time, part time, and vacation homes – can be a wealth of tax savings.

Is This Tax Deductible?

The key to saving money on your tax return is to take advantage of the many deductions offered to full-time rental property owners. Your property is considered a full-time rental if you allocate fewer than 15 days for personal use.

Some of the most basic deductions that landlords could easily overlook are costs related to cleaning and maintenance, property taxes, management fees, mortgage interest, advertising, and even property insurance.

Want to save even more money? You can also deduct expenses related to traveling to manage your property, depreciation of your property, HOA fees, insurance claim deductibles, operating expenses, and even your utilities. Basically, any cost you incur to keep your rental property up and running can be filed as a tax deductible expense.

If your rental property expenses exceeded your rental earnings, you can even deduct your losses. If your annual income (adjusted gross income) is below $100,000, you are eligible to deduct up to $25,000 of your rental losses. As your annual income increases, the rental loss deduction is reduced.

One of the best tips any landlord could get is to keep meticulous records. Treat your rental property like a business. The more expenses that you document, the better chance you have to get those tax deductions and keep more of your money.

Personal Use of  Your Rental Property

The deductions available for rental property owners are subject to the amount of time during the given tax year that a rental property is used for personal reasons. In short, if your property is a hybrid combination of personal use and rental, your tax advantages will change.

If you rent your home fewer than 15 days out of the year (like for a special event in your town), you get to keep all of the money you earned – tax free!  You can still also deduct your expenses related to your rental efforts as itemized deductions.

On the flip side, if personal use of your rental property exceeds 14 days, you can deduct your rental expenses based on the percentage of time it was used as a rental.  Your rental expense deduction will also be limited to the amount of rental income you receive.

New to the Rental Game

With the popularity of travel websites such as Airbnb, many people are interested in the opportunity to turn their primary and/or secondary home into a money making property.

If you decide to start an on demand rental business you will receive a Form 1099-Misc or Form 1099-K reporting your rental income, which will be reported as rental property on your taxes.

Gurian CPA Firm, a Dallas accounting firm, is here for all of your tax preparation and tax planning needs. Contact us today for an appointment to discuss how we may assist you.

   Tax Tips for Families who Use a Nanny

Hiring a nanny will impact your life in many ways, including your finances. In addition to the salary you pay your nanny, you are expected to pay a combination of taxes. Neglecting to do so could lead to trouble with the IRS, including large penalties.

Commonly referred to as the “nanny tax,” this is nothing more than the taxes you are required to withhold from your employee, as well as the taxes you are expected to pay as a household employer.

What is FICA?

Do you expect to pay your nanny more than $1,900 in 2015? If so, you should begin to withhold his or her share of Social Security and Medicare taxes.

This sounds complicated, but it is actually quite simple. You will withhold a total of 7.65% from each payment. This includes 6.2% for Social Security tax and 1.45% for Medicare tax.

Note: you must stop withhold Social Security tax after your nanny’s wages for the year reach $117,000.

The above is an explanation of what your employee pays. As an employer, you will pay the other 7.65% of FICA. You may also have to pay state and local taxes.

What about Federal Income Tax Withholding?

According to the IRS, “you are not required to withhold federal income tax from wages you pay a household employee.”

You should only do this if your employee requests and you comply. In this case, you must have your nanny complete Form W-4, Employee’s Withholding Allowance Certificate.

What You Need to Pay Nanny Taxes

If you are required to pay nanny taxes, you need the following:

  • State and federal tax identification numbers.
  • Payroll information.
  • Forms, such as a completed W-2.
  • Quarterly filings for federal and state returns.

Conclusion

You know you need to pay nanny taxes for your household employee, but are still confused as to how and when to remit payment. To avoid confusion and guarantee accuracy, consider hiring a payroll company with experience assisting household employers, like Gurian CPA Firm.