Renting Your Spare Room may NOT be the Answer!
Renting out Your Spare Room to Cover Your Bills May NOT be the Answer!
The current housing crisis means that many homeowners are considering renting their properties as an alternative to selling, or even renting out spare rooms to help meet their mortgage payments. But homeowners desperate for additional income in these tough economic times may find themselves in trouble with the Internal Revenue Service (IRS) when it comes to renting property.
Leasing one’s home (or a portion of it) to meet mortgage obligations can lead to disaster with the Internal Revenue Service (IRS) if any money collected as rent is not reported as income.
The IRS has a series of guidelines that have to be met when it comes to paying taxes on rental income and failing to properly report them. This can lead to complications that include fines, interest, and possible garnishment of wages to collect the unpaid taxes.
Anyone who rents or leases property for more than 14 days is subject to paying taxes to the IRS. Add to the equation the fact that there are different rules on IRS tax liability based on how the property is rented and it becomes obvious that homeowners should seek the advice of an expert to prevent trouble with the IRS.
Obviously, in some cases renting property can result in a tax liability to the IRS that results in greater financial problems than before a homeowner considered leasing.
Among the different IRS tax rules that apply to rental property income are:
- Whether the property is used both for personal and rental purposes
- Whether the residence is being rented strictly for profit as opposed to assisting the homeowner in paying a mortgage
If you have questions about this or any other IRS tax related issue, please contact Florida Tax Attorney Mary E. King for your free, confidential IRS tax help consultation.
