tax - Linkenheimer LLP CPAs & Advisors

Vacation Home: How Is Your Tax Bill Affected If You Rent It Out?

If you’re fortunate enough to own a vacation home, you may want to rent it out for part of the year. What are the tax consequences?

The tax treatment can be complex. It depends on how many days it’s rented and your level of personal use. Personal use includes vacation use by you, your relatives (even if you charge them market rent) and use by nonrelatives if a market rent isn’t charged.

Less than 15 days

If you rent the property out for less than 15 days during the year, it’s not treated as “rental property” at all. In the right circumstances, this can produce revenue and significant tax benefits. Any rent you receive isn’t included in your income for tax purposes. On the other hand, you can only deduct property taxes and mortgage interest — no other operating costs or depreciation. (Mortgage interest is deductible on your principal residence and one other home, subject to certain limits.)

By Linkenheimer LLP|2021-10-14T20:31:26+00:00October 14th, 2021|property tax, real estate|0 Comments

California Tax Updates for 10/6

Update 1:

Recent legislation in California helps warehouse employees. The legislation prevents warehouse employers from terminating workers for failing to meet quotas that interfere with rest breaks, effective Jan. 1, 2021. Specific employers must give each nonexempt employee working in a warehouse distribution center a written description of each quota to which the employee is subject. Quotas must include the number of tasks to be done or materials to be produced or handled, the timeframe for completion, and possible consequences if quotas aren’t met. Employees won’t be required to meet a quota that prevents compliance with meal or rest periods, use of bathroom facilities, or health and safety laws.

Update 2:

California Governor Gavin Newsom is considering several payroll-related bills. Among them are a bill that would require food delivery platforms to pay any gratuities in full to the person delivering the product. Any tip paid on a pickup order would be paid in full to the food facility. Also being considered is […]

By Linkenheimer LLP|2021-10-06T22:45:57+00:00October 6th, 2021|CA tax, california|0 Comments

The Tax Score of Winning

Studies have found that more people are engaging in online gambling and sports betting since the pandemic began. And there are still more traditional ways to gamble and play the lottery. If you’re lucky enough to win, be aware that tax consequences go along with your good fortune.

Review the tax rules

Whether you win online, at a casino, a bingo hall, a fantasy sports event or elsewhere, you must report 100% of your winnings as taxable income. They’re reported on the “Other income” line of your 1040 tax return. To measure your winnings on a particular wager, use the net gain. For example, if a $30 bet at the racetrack turns into a $110 win, you’ve won $80, not $110.

You must separately keep track of losses. They’re deductible, but only as itemized deductions. Therefore, if you don’t itemize and take the standard deduction, you can’t deduct gambling losses. In addition, gambling losses are only deductible up to the amount of gambling […]

By Linkenheimer LLP|2021-09-29T20:31:10+00:00September 29th, 2021|capital gains, deduction, deductions, estate, estate tax|0 Comments

Tax Depreciation Rules for Business Automobiles

If you use an automobile in your trade or business, you may wonder how depreciation tax deductions are determined. The rules are complicated, and special limitations that apply to vehicles classified as passenger autos (which include many pickups and SUVs) can result in it taking longer than expected to fully depreciate a vehicle.

Cents-per-mile vs. actual expenses

First, note that separate depreciation calculations for a passenger auto only come into play if you choose to use the actual expense method to calculate deductions. If, instead, you use the standard mileage rate (56 cents per business mile driven for 2021), a depreciation allowance is built into the rate.

If you use the actual expense method to determine your allowable deductions for a passenger auto, you must make a separate depreciation calculation for each year until the vehicle is fully depreciated. According to the general rule, you calculate depreciation over a six-year span as follows: Year 1, 20% of the cost; Year 2, 32%; Year 3, 19.2%; Years 4 and 5, 11.52%; and Year 6, 5.76%. If a vehicle is used 50% or less for business purposes, you must use the straight-line method to calculate depreciation deductions instead […]

By Linkenheimer LLP|2021-09-22T18:16:00+00:00September 22nd, 2021|business, depreciation, vehicles|0 Comments

Selling a Home: Will You Owe Tax on the Profit?

Many homeowners across the country have seen their home values increase recently. According to the National Association of Realtors, the median price of homes sold in July of 2021 rose 17.8% over July of 2020. The median home price was $411,200 in the Northeast, $275,300 in the Midwest, $305,200 in the South and $508,300 in the West.

Be aware of the tax implications if you’re selling your home or you sold one in 2021. You may owe capital gains tax and net investment income tax (NIIT).

Gain exclusion

If you’re selling your principal residence, and meet certain requirements, you can exclude from tax up to $250,000 ($500,000 for joint filers) of gain.

To qualify for the exclusion, you must meet these tests:

You must have owned the property for at least two years during the five-year period ending on the sale date.
You must have used the property as a principal residence for at least two years during the five-year period. (Periods of ownership and use don’t need to overlap.)

In addition, you can’t use the exclusion more than once every two years.

Gain above the exclusion amount

What if you have more than $250,000/$500,000 of profit? Any gain that […]

By Linkenheimer LLP|2021-09-14T17:48:00+00:00September 14th, 2021|capital gains, tax|0 Comments