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Year-End Tax Considerations for Vacation Rental Owners
When the year comes to a close, remember your year-end responsibilities.
Balance Expenses & Income
For those overachievers out there who finish their holiday shopping by Thanksgiving and have next year's vacation arrangements already in place, you've also probably already balanced your books and have a good idea where you (and your vacation rental) stand for the year.
For everyone else, it's time to finalize your income and expenses for the year to see where you stand on income verses expenses for your vacation rental.
If you had a stellar, income-generating year, but few expenses, talk to your accountant about the tax ramifications of capital improvements, new equipment or other purchases during the tax year rather than waiting until after January 1st. But hurry, these purchases must be made before midnight on December 31st.
To offset the income, considering making a few year-end tax-deductible purchases:
• Update your furnishings and décor.
• Invest in a new computer, digital camera, or copier/fax combo.
• Hire a professional photographer or copywriter.
• Replace appliances that are on their last legs.
• Buy that new hot tub or large ticket item you have been contemplating purchasing. Don't worry about the delivery or installation right now, that can be taken care of later—but make sure they charge you so your receipt reflects a purchase date for the current year.
• Renew your portal subscriptions (especially if they expire in January).
• Try out a few new listing sites.
For more information, consult the IRS Guide to Business Expenses.
Remember things that you purchase must solely be used for your vacation rental business in order to be considered deductible. For example, you cannot buy a hammer, nail in one nail and then take it to your primary home and “call it” a deduction for your vacation rental home.
Items such as cameras, cell phones, computer, etc, deductions are generally deductible on a percentage of usage basis. For instance if you only use your computer for inquiries and bookings, then likely you would be able to deduct 100% of the cost of that computer, however if the computer is also a “family computer”, only a portion of the cost would be deductible.
Prepare 1099s for Individual Contractors
If you paid your housekeeper, maintenance person, or other individual contractor more than $600 this year, you're likely required to send them a 1099 MISC (for nonemployees) by January 31st.
For more info, visit: http://www.irs.gov/instructions/i1099msc
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