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Author: inparadise Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 91  
Subject: Re: Schedule C vs E. Date: 1/29/2013 4:19 AM
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I know you are not an expert, but let's take a "typical" beach rental run by a management company.

It is an understatement to say I am not an expert. I haven't even really taken the plunge yet, other than to have bought a vacation home and look into the industry thoroughly. We had actually decided not to put our house on the market, since we will be moving there in a couple of years, but are in negotiations to buy another property at this time. If we get that, then we will put both on the market. There is some indication from the people I know who have been through the audits that the IRS would look more kindly on a schedule E filing if you have more than one property. It will work for us no matter what schedule we have to file, though.

I don't know about properties subject to a management co. Don't know how that affects taxes. We would self manage. Our fall back position on these properties if we decide that running vacation rentals is not for us is to use it as our home in retirement or as a long term rental. They have to be a good investment under both conditions for us to buy. Any time we factored in management fees, the property failed to be a good investment. YMMV.

Something to consider when looking at your days rented average is an off season multi month rental to retirees. Depending on where you are located, this could be an option. In fact, it is something we are considering doing personally, renting out a place in SC or GA for the winter. Our mountain house will be too cold for us to remain active, and I've always preferred walking on isolated beaches even in cold weather to roasting on a crowded beach in the summer.

So then you owe social security tax on yourself for your net income? Is it on net income after management and cleaning fees or net after all expenses, like depreciation, cable bill, electric, etc?

My understanding if you have to file schedule C is that you would then owe social security, medicare, etc after all expenses, including depreciation. Even a lot of so called pros are confused on the C vs E issue.

IP
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