Lock in tax breaks for short-term rentals — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily
  • LinkedIn
  • YouTube
  • Twitter
  • Facebook
  • Google+

Lock in tax breaks for short-term rentals

Get PDF file

by on
in Small Business Tax,Small Business Tax Deduction Strategies

Do you own a vacation home you rent out during the winter months? The place could be a goldmine of tax deductions, but you may be hampered by the passive activity loss (PAL) rules.

Strategy: Keep rental agreements to no more than a week. If you qualify under a tax law exception for short-term rentals, you can sidestep the PAL rules altogether.

Here’s the whole story: Generally, your deductions from passive activities can only offset income from other passive activities. Any excess passive loss is suspended and carried over to next year. For this purpose, a passive activity is defined as one in which you do not “materially participate” (see below).

Although rental real estate activity is automatically treated as a passive activity, a limited offset up to $25,000 is allowed for certain active participants. To qualify as an “active participant,” you must have “regular, continuous and substantial” involvement in the activity, li...(register to read more)

To read the rest of this article you must first register with your email address.

Email Address:

Leave a Comment

Previous post:

Next post: