Volume 5, Number 7 Tax Tidbits 7 Tax Tips On Vacation Home Rentals This summer, you may be sticking close to home or traveling out and about. Either way, if you have a vacation home, it pays to think about taxes now, long before tax time next year. I’ll bet you are used to the admonition that everything is income to the IRS. Everything has to be reported on your taxes, right? It is true that if you rent a home to others, you usually must report the rental income on your tax return. However, you may not have to report the rent you collect if the rental period is short and if you also use the property as your home. In most cases, you can deduct your rental expenses. When you also use the rental as your home, your deduction may be limited. Here are some basic tax tips that you should know if you rent out a vacation home. 1. Vacation Home. A vacation home can be a house, apartment, condominium, mobile home, boat or similar property. 2. Schedule E. You usually report rental income and rental expenses on Schedule E, Supplemental Income and Loss. Your rental income may also be subject to Net Investment Income Tax. 3. Used as a Home. If the property is “used as a home,” your rental expense deduction is limited. This means your deduction for rental expenses can’t be more than the rent you received. For more about these rules, see Publication 527, Residential Rental Property (Including Rental of Vacation Homes). 4. Divide Expenses. If you personally use your property and also rent it to others, special rules apply. You must divide your expenses between the rental use and the personal use. To figure how to divide your costs, you must compare the number of days for each type of use with the total days of use. 5. Personal Use. Personal use may include use by your family. It may also include use by any other property owners or their family. Use by anyone who pays less than a fair rental price is also personal use. 6. Schedule A. Report deductible expenses for personal use on Schedule A, Itemized Deductions. These may include costs such as mortgage interest, property taxes and casualty losses. 7. Rented Fewer than 15 Days. If the property is “used as a home” and you rent it out fewer than 15 days per year, you do not have to report the rental income. In this case you deduct your qualified expenses on Schedule A. If you still need to file your 2014 tax return, you can use IRS Free File to make filing easier. Free File is available until October 15. If you make $60,000 or less, you can use brand-name tax software. If you earn more, you can use Free File Fillable Forms, an electronic version of IRS paper forms. Free File is available only through the IRS.gov website. The IRS has a nice summary on Renting Residential and Vacation Property, Tax Topic 415. Also check out IRS tax tips on Rental Income and Expenses. The IRS videos on Renting Your Vacation Home are in English, Spanish, or ASL. There are also IRS podcasts on Renting Your Vacation home in English or Spanish.	Click on any headline below to read more: Top Stories of July 2015 FOREIGN ACCOUNTS India Signs Pact To Give IRS Account Data, Could End Black/White Money Too India has joined the U.S. in a broad FATCA tax disclosure agreement that will force many American citizens and green card holders to declare Indian accounts. In the long run, it will have even bigger implications. Swiss Accounts Facing 50% IRS Penalties Balloon To 26 Banks FATCA demands global banking transparency. Meanwhile, the IRS' OVDP and Streamlined amnesty programs continue. Which is best, and why?  Offshore Accounts? Choose OVDP Or Streamlined Despite FATCA With FATCA, offshore account compliance is even more important. And picking between the several IRS amnesty programs can be nuanced. Be realistic about your facts, and choose carefully.  Offshore Banks Reveal Account Data, As IRS Amnesty For Many Involves 50% Penalty With FATCA and the U.S. settlement deal for Swiss banks, global transparency is here. And the penalty exposure for unreported offshore accounts is huge, both civil and criminal. With more banks on the IRS 50% penalty list within the OVDP, even a 50% deal is still vastly better than the bigger penalties and prosecution that are possible. FBARs For Foreign Accounts Are Due June 30. Should You File For The First Time? Penalties for failing to file FBARs on foreign accounts can be huge. Yet filing your first FBAR on previously undisclosed accounts can be playing roulette. IRS CONTROVERSY IRS Won't Release Lois Lerner Emails — Because They Might Be Duplicates Exactly who did what in the IRS targeting scandal is still unclear, in part because of those elusive emails. And the IRS isn't exactly being easy about it.  TAX EVASION AND FRAUD Happy's Pizza Founder Gets Over 4 Years Prison For Tax Fraud Income tax and payroll tax brought down the Happy's Pizza founder yielding a stiff prison sentence. Record 27 Years Prison For Tax Fraud, Beating Tax Fraud Queen's 21 Years A 27 year prison sentence for tax fraud is high, reflecting increasing harshness on tax crimes, and on identity theft refund fraud in particular. Amazingly, IRS Collects 30 Year Old Tax Debt Despite 3 Year Statute Of Limitations The IRS has 3 years to audit and after an assessment, 10 years to collect. So how come the IRS can collect even after 30 years? FEDERAL AND STATE TAXES Big Court Defeat For Marijuana Despite Record Tax Harvests Even legal medical marijuana businesses have trouble deducting their expenses, and the IRS has just handed the Justice Department a big victory in the influential Ninth Circuit Court of Appeals. NONPROFIT AND RELIGIOUS ORGANIZATION TAXES Warren Buffett $2.8 Billion Donation Gets Supersized — By Taxpayers Warren Buffett wouldn't think of donating cash to charity, and neither should you. Donating appreciated property supersizes your tax deduction. EMPLOYEE VS. INDEPENDENT CONTRACTOR Hillary Clinton Disses Uber And On-Demand Economy Hillary Clinton took a swipe at on-demand companies like Uber that engage in what she called 'wage theft.' It's a serious accusation, but is it true? If Uber, FedEx, Other Workers Are Employees, Who Pays What? Uber's darling status may be in jeopardy over how it treats its drivers, and vast taxes and benefits hang in the balance. Uber Driver Is An Employee, Rules California. There Goes That $50B Valuation California just ruled Uber drivers are employees not independent contractors, and that could mean knock-off claims everywhere for the upstart company. CORPORATE TAXES Big Oil Spill Tax Write-off Shows BP Does Not Stand For 'Big Penalty' BP's historic settlement could saddle American taxpayers with up to a third of the cost via BP tax deductions. PG&E $1.6 Billion Explosion Tax Break Under Fire PG&E was slapped with $1.6 billion in fines over its 2010 pipeline explosion. Should the utility be able to deduct it on its taxes? OBAMACARE TAXES Obamacare Travesty: IRS Fines Employers For Reimbursing Workers Obamacare is full of taxes and penalties, and many of them make no sense. In particular, penalizing small employers for helping their employees is positively Kafkaesque.
@ 2015 Wood LLP.  Visit our website www.WoodLLP.com. 333 SACRAMENTO STREET   |   SAN FRANCISCO, CA 94111   |   TEL 415-834-1800   |   FAX 415-834-1888 If you no longer wish to receive the Wood LLP Tax Alert, please reply to this email or click here. If you have received this communication by mistake, please return it (and any attachments) by replying to the sender and deleting it in its entirety from your computer. It may be protected under attorney-client and/or work product privileges, and may be used only by the intended recipient. Please consider the environment.