Tax Ch 3 Ses1(2010)

Tax Ch 3 Ses1(2010) - 1. Mortgage interest &...

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Income Tax – Chapter 3 Business Expenses Retirement Plans
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Rental income – taxable Rental loss – may be deductible within limits
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Proper Schedule Schedule E – rental income or loss Schedule C – business income or loss Must provide services beyond rental Maid service Motel, hotel, etc.
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Vacation Home Rules Rented for 14 days or less Not a rental Rent not claimed, expenses not deducted Rented more than 14 days Rental Expenses prorated by days and deducted from rent income Net rental income taxable Net rental loss may or may not be deductible
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Vacation Rentals, continued Personal use not more than 14 days or 10% of days rented Prorated expenses deducted – can have loss Personal use more than 14 days or 10% of days rented Prorated expenses deducted only to amount of rental income – no loss
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Proration of Expenses 1. Calculate % of days rented Number of days rented Personal + rental days 2. Multiply each expense by %
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Vacation Rentals, continued Order of deductions:
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Unformatted text preview: 1. Mortgage interest & property taxes 2. Out-of-pocket expenses utilities, repairs, maintenance 1. Depreciation Self-Study 3.1 (page 3-5) Schedule E (page 3-7) Passive Loss Limitations General rule: Passive losses deductible against passive income Unused passive loss carried forward (suspended) Suspended losses deductible when investment sold Rental exception: Up to $25,000 deductible if Actively involved in rental Modified AGI not over $100,000 Phase out of Loss Loss allowed: $25,000 - 50% of AGI over $100,000 AGI over $150,000 loss carried forward Self-Study 3.2 (page 3-9) Form 8582 (page 3-13) Real Estate as Trade or Business More than 50% of personal service for year is real property trades or businesses More than 750 hours of material participation If qualified as trade or business: Schedule C Loss fully deductible Income subject to self-employment tax (SS)...
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Tax Ch 3 Ses1(2010) - 1. Mortgage interest &...

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