bob said...
Rental Property Question:
I have a C Corp and would like to rent out my 2nd home to my C Corp. From what I have read this seems possible. Can you tell me what I would need to do this, and is this a smart thing to do?
So far I have gathered a sample lease agreement, and all my mortgage info. Income vs. Expenses, do I fill out a 1040 (Schedule E) at the end of the year for rental income, as far as expenses can I write off (interest, depreciation, utilities, maintenance, interest on 2nd mortgage)?
Thanks.
Monday, May 3, 2010
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7 comments:
Bob, renting to your C Corporation is definitely possible. Is it a good idea or not, I wont be able to tell as there are many other factors which needs to be taken into consideration before making this decision. This can be accomplished by consulting a CPA who can help you with tax planning.
If you decide to rent out to your C Corp then you must disclose this as rental income on your personal tax return on Schedule E. You also have to maintain documents to support your deductions such as mortgage interest, depreciation, amortization if any, repairs maintance and other expenses to keep your property in good condition.
Let us know if there are any further questions you may have or need help with tax planning.
Good luck,
Web Tax Office Team
Hello!
First of all I just want to tell you what a great service it is that you are offering accounting & tax advice here! Thank you!!
My question relates to wedding planning. A friend is paying me $700 to plan her wedding. I do NOT have a wedding planning business, she just needed help this one time.
So how much sales tax do I charge her (I live in Utah) and will I just add this to "Other Income" on my 2010 taxes?
From the total $ amount I collect from her, how much should I save for paying taxes (because I will probably owe on this, right?)
Sorry! I know absolutely nothing about taxes & I need serious help.
THANK YOU SO MUCH!!
--
Jennifer
jennifer.lyday@gmail.com
Jennifer, thanks for the encouragement. We sure do appreciate your feedback.
As far the sales tax is concerned, you do not have to pay any sales tax as you would be receiving the $700.00 for wedding planning which is a service. Since, you are not selling any products you are not required to collect and pay any sales taxes.
Secondly, we will not be able to tell you exact amount of income tax you would be paying on this income as the tax you pay will depend on your income tax bracket. We would suggest to put appx. 25% aside if that is more convenient to you.
Please feel free to send us an email at info@webtaxoffice if you need help with any tax preparation.
Good luck,
Web Tax Office Team
I purchased a home in Alabama in October 2008 and received the $7500 tax credit. I sold my home in March 2010. I did not make any profit at all on the sale. In fact, I ended up paying about $2600 at closing. Am I going to have to repay the $7500 next year?
Dear Caroline, thank you very much for the opportunity to help you with your tax related questions.
The $7,500.00 First Time Home Buyers credit was approved by George Bush when he was president. This credit works like an interest free loan where you repay $500.00 each year which is an addition of tax on the tax return. This credit is not the same as the one Obama approved in the amount of $8,000.00 which does not have to be paid back if all the requirements are met. Hence, you will need to repay this $7,500.00 over 15 year period.
I hope this explanation provides answers to all your questions. Please let us know if you have more questions.
Good luck,
Web Tax Office Team
We bought a larger home in Dec. 2009 across the street from our previous smaller home, with the intention of saving the smaller house for my widowed, elderly mother to eventually move into. She paid off the mortgage on that house, but we did not switch the title, so we now own both houses.
Our present verbal agreement is that we will pay my mother back for the mortgage she paid off as our finances allow. There is presently no written payment schedule.
It may be a few years before my mother will be ready to move into town from her family farm, which is still in her name. In the meantime, we are thinking that we should possibly rent out the smaller house (for about $1000/mo.) to gain some income from it, so we can pay my mom back for the mortgage she paid off for us. This would mean that we would need to pay tax on that rental income and my mom would then need to also pay tax on that money when we use it to pay her back. Is there any way we can avoid being "double taxed" in that way? Can the renter of the house pay my mom directly every month to avoid any payment coming to us? Would it be advantageous to just transfer the house title into my mom's name? She didn't want to do that because the farm is still in her name and she doesn't want to own any secondary property because of her age.
We do not want to see a temporary jump in our annual income for a couple of years because that would cause our kids (one who has significant medical expenses) to lose their health insurance coverage from the state.
Any suggestions would be greatly appreciated.
Thank you.
Marie
Dear Marie, thank you for approaching us with your tax questions.
First congratulations on the purchase of your new home. Now to answer your questions, you will not be paying double tax. To give you an example, if you are receiving $1,000.00 as rental income and paying the same amount out to your mom, then your total rental income will be ZERO, therefore, you will not be paying any taxes on this amount. Your mom will pick up the $1,000.00 as income on her personal tax return and pay taxes. You also need to keep one more thing in mind that the payments you make to your mom will need to be broken down between interest and principal payments, as the interest is allowed as deduction not the principal portion of the payment. Regardless whether you disclose it as rental income or have your mom disclose it directly, your mom will have to disclose the amounts either as rental income or interest income.
We hope this explanation will help you make the proper decision.
Good luck,
Web Tax Office Team
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