I am starting to investigate a VR property and understand that most of the time it tends to generate passive income, thus restricting deductions. Does anyone know if using Home Away to rent it myself qualifies it as an active activity versus having a local rental company do it? If so, it seems like the ability to write off additional expenses will more than offset the possible decline in rental income.Thanks.
Puddinhead,Multiple people at the Yahoo vacation rental board have been audited by the IRS and told they need to file a schedule C rather than E for their vacation rental. This of course also means needing to pay social security, as it would be qualified as a business.With the surge of vacation rentals, the IRS seems to be taking notice of the industry as a way to increase revenue. If I were you I would talk to a tax adviser about this before deciding to take the plunge, if tax purposes are a major motivator in the purchase.HomeAway has also been on the boards a lot. There is a lot of dissatisfaction lately, and they have been losing long term customers. How would you rent it out if you did not advertise there? For most rentals, all it would take is renting it one extra week to pay the fee and take home a bit more. Are you looking to have someone manage it for you? That may be an issue with it being qualified as active. IP
As far as management goes, there are several strong management companies that rent out in this area, in addition to Home Away. If Home Away were to make me an "active" manager, then I could be less effective than a management company and still net more. In addition, if it made me an "Active" manager, then I could deduct expenses and depreciation against my salary income since it would probably exceed my rental income. This would be beneficial. Of course all this will depend on what a CPA says. Same for Schedule C vs E (thanks for that, I will check it out).Of course every tax law is about to change, so it may not matter ;-(I have rented twice from Home Away and both experiences were very good. In both cases we were able to interact with the owners on many levels. In one case we talked a lot about investing in real estate. On my latest trip, I called up and asked if I could stay a couple extra days, he had someone coming in on the second day, but said I could stay one more. He also gave it to me for half price since it was a "dead" day. This was a nice surprise. When I later told him there were no paper towels, last roll of tp and something else I forgot, he was very apologetic. I said no biggie, just might want to make sure the maid stays on top of it. In addition, without my asking, he send a "refund" check of half of the rent I paid for the extra day, which was totally unnecessary. But it helps make me a loyal renter.
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