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Archive for the ‘Rental Compliance’ Category

How To Avoid IRS Compliance Traps

Thursday, June 12th, 2014

With all sources of income, taxes are an important consideration. Income from your vacation rentals is no exception. With vacation rentals, there are 3 key tax considerations.

1. Personal Use and Rental Days

The number of days you personally use your vacation rental property has a significant impact on how the IRS treats your rental income:

a. If personal use is limited to 14 or fewer days or 10% of the time your property is rented, you can write-off 100% of rental expenses against rental income.

b. If personal use exceeds 14 days, you can still write-off a portion of your rental expenses against rental income. For example, if you rented your property for 90 days and had 30 days of personal use during the year, you are allowed to write-off 75% (90 rental days/120 total usage) of your rental expenses against rental income.

c. If you rent your property for 14 days or less, you are not required to report the rental income for income tax purpose.

2. Common Rental Expenses
The following is a list of common rental expenses that may be written-off against rental income:

* Management Fees
* Mortgage Interest
* Mortgage Points
* Repairs
* Taxes
* Utilities
* Advertising
* Cleaning & Maintenance
* Commissions
* Depreciation
* Insurance
* Legal/Professional Fees

3. Passive vs Active Income
The IRS usually considers income from rental real estate to be a passive activity; that is, you get income mainly for the use of your property rather than for services provided. The IRS allows you to off-set passive losses against passive income, not ordinary income such as wages. Any excess passive losses are carried forward to the next tax year.

If you are actively involved in the rental of your vacation home, up to $25,000 of the loss from your rental property could be deductible against ordinary income. There are restrictions and limitations if you make more than $100,000 annually.

At VRS we recognize that keeping more of your rental income is one thing all vacation homeowner have in common. That is why we provide essential rental management services as an affordable fixed monthly price. Compliance Services are just $50 per month.

Fraud and Your Vacation Rental Property

Thursday, May 15th, 2014

In addition to attracting the attention of millions of travelers, the $23 billion vacation rental industry is unfortunately attracting a variety of scams. One need only perform a Google search to find story after story of how both travelers and vacation homeowners are becoming victims of fraud and phishing schemes. This is a trend that will no doubt continue to plague the industry. But what steps can you take to protect yourself and your guests from the impact of these scams?

  • We will take a look at the two most common scams:
  • •   Creation of Fake Rental Listings
    •   Phishing Schemes

  • Creation of Fake Rental Listing
  • In this scam fake rental listings are created to attract legitimate travelers. These listings are often created using pictures and information taken from legitimate listings. The unsuspecting traveler typically learns that they have been the victims of fraud only after they have paid out thousands of dollars for the rental.

    You can expect that as these stories are picked-up by national news sources, travelers will become increasing concerned and will no doubt make inquiries designed to assess the authenticity of your listing. Recent articles by ABC News and Forbes, among many others, suggest that travelers take a series of precautions to avoid fraud. The below chart reflects some recurring recommendations and steps you can take to ensure you are prepared to address traveler questions.

    vrs_phishing_recommendations_table

    Google offer a search service called Google Images that allows users to search the Web for image content. VRS recommends that you periodically search Google Images to determine if your property photos are being used for unauthorized purpose. To perform a search, simply copy the image address into Google Images and perform a search.

  • Phishing Scam
  • In a Phishing scam, someone masquerading as a legitimate guest contacts you, with the sole objective of obtaining sensitive information about your VRBO listing and/or the email address you use to manage your vacation rentals. Typically they want to obtain access to your email, which will allow them to hijack your rental inquiries and redirect rental deposits to themselves.

    Here are some steps that you can take to avoid being the victim of Phishing scams.
    •   Be suspicious of unusual rental inquiries. Vague travel dates, grammar or spelling errors, or requests that are inconsistent with your property can all be signs of a phishing scams
    •   Use a dedicated email address to manage your rentals. As much as we try, it is difficult to create a firewall around our personal email account.
    •   Subscribe to VRBO text notifications service. By receiving a text notification of all rental inquiries you can be sure that you are aware of all such inquiries.
    •   Use best practices to manage your email and VRBO passwords. This consists of longer passwords (minimum of 8 characters), do not use words, use a combination of numbers, upper and lower case letters, and use special characters. Periodically change your password.

    VRS is dedicated to providing safe and secure rental management services that highlights your property’s unique rental characteristics. Our ala carte menu of services are provided at a low fixed monthly fee.

    One Frugal Girl’s Secret Is Out: Take The Fork In The Road To VRS

    Wednesday, March 26th, 2014

    As Featured In: OneFrugalGirl.com   

    Vacation rental ownership, for most of us, was never really the original intention when deciding to make that family retreat purchase – at some point it settles into a seasonal rental with unintended consequences. We backed our way into short-term rentals as a way to offset the monthly burden when we’re not using ours. If you find yourself in this same position, you already know, or soon will be coming to the realization that your mission is to maximize revenue on every rental.

    The key to maximizing revenue is an equation that could make your head spin at first, but the kernel is simple mathematics: rent as many weeks as possible charging the highest seasonal rates while simultaneously decreasing commissions, fees and other related expenses. Traditionally, there have been two ways to handle the rental activity and management. So here’s the insider’s perspective.

    The first and most beaten path is to hire a “full-service” management company that charges commissions between 20-40% per booking. If your property rents for $2000 per week, you’ll pay the manager $400 to $800 in commissions! This increases the burden to generate more rentals. Spoiler alert below: that simple math I mentioned above doesn’t pencil out for me.

    My summer home rents roughly 16 weeks per year between May and September. A 20% commission rate would cost me $6,400 and at 40%, the commissions would tally up to $12,800! Additional fees may be charged for advertising, online listings, emergency services, inspections and maintenance. Suddenly your rental manager becomes a less than ever-faithful partner in your rental business while you’re carrying all of the risk. Needless to say, I exited that relationship.

    The alternative path is doing-it-yourself. Skipping the manager and commissions makes sense for some, just realize going in that it’s nearly a full-time job. Getting your property listed on VRBO is the easy part. The day-to-day of managing your property and keeping it rental-ready for the next guest and quickly responding to inquires is stressful enough, let alone managing the rental agreements (if you don’t have one, you need one). Did I mention collecting rental taxes and filing reports? Check with your local municipality because they see home rentals as a growing revenue source.

    Are you interested in finding a lower cost solution that provides the same benefits at a fraction of the cost? If so, Vacation Rental Services (VRS) is a new fork in the road worth exploring. VRS provides many of the benefits of a full service rental management company without charging any rental commissions. That’s reason enough to waive goodbye to your rental manager quickly. In lieu of rental commissions you simply pay a fixed monthly fee for the services you need.

    VRS rental management includes a full-on website to attract new guests and handle rental inquiries at a fraction of the cost of traditional sources. They can handle other rental related tasks too, such as collecting rental payments, taxes and security deposits, managing your rental calendar and handling and processing rental documents – all online (someone that gets technology).

    You can use their online rental calculator to compare the services your management company provides and charges with what you will pay VRS. After visiting their website at http://www.vacation-rental-services.com, you may just find yourself asking one of two questions – “Why am I paying so much?” or “Why am I dealing with the hassles?”

    Click Here to Read The Article on One Frugal Girl

    The IRS and Your Vacation Rental

    Thursday, September 5th, 2013

    With all sources of income, taxes are an important consideration. Income from your vacation rentals is no exception. With vacation rentals, there are 3 key tax considerations.

    1. Personal Use and Rental Days

    The number of days you personally use your vacation rental property has a significant impact on how the IRS treats your rental income:

    a. If personal use is limited to 14 or fewer days or 10% of the time your property is rented, you can write-off 100% of rental expenses against rental income.

    b. If personal use exceeds 14 days, you can still write-off a portion of your rental expenses against rental income. For example, if you rented your property for 90 days and had 30 days of personal use during the year, you are allowed to write-off 75% (90 rental days/120 total usage) of your rental expenses against rental income.

    c. If you rent your property for 14 days or less, you are not required to report the rental income for income tax purpose.

    2. Common Rental Expenses
    The following is a list of common rental expenses that may be written-off against rental income:

    * Management Fees
    * Mortgage Interest
    * Mortgage Points
    * Repairs
    * Taxes
    * Utilities
    * Advertising
    * Cleaning & Maintenance
    * Commissions
    * Depreciation
    * Insurance
    * Legal/Professional Fees

    3. Passive vs Active Income
    The IRS usually considers income from rental real estate to be a passive activity; that is, you get income mainly for the use of your property rather than for services provided. The IRS allows you to off-set passive losses against passive income, not ordinary income such as wages. Any excess passive losses are carried forward to the next tax year.

    If you are actively involved in the rental of your vacation home, up to $25,000 of the loss from your rental property could be deductible against ordinary income. There are restrictions and limitations if you make more than $100,000 annually.

    At VRS we recognize that keeping more of your rental income is one thing all vacation homeowner have in common. That is why we provide essential rental management services as an affordable fixed monthly price.

    Why Take the Risk? Be Legal in the New Year.

    Thursday, December 27th, 2012

    With 2013 just around the corner, should you include applying for your vacation rental business license to your year-end checklist? As discussed in last week’s blog, local and state governments are cracking down on vacation homeowners who are not paying required lodging taxes. Compliance is not difficult, but it can be tedious and confusing.

    Homeowners can renew their existing licenses by clicking on the applicable link below and following the instructions for “MUNIRevs”. Homeowners who are in need of a business license can also use the local government links below, however they will first need to apply for a sales tax number. Clicking on the State of Colorado link can access the required form: Click Here

    Business Licenses Renewal/Application Links

    For Town of Telluride Click Here

    For Mountain Village Click Here

    Once the application is submitted, homeowners will be provided with tax filing forms. Sales tax forms will need to be periodically filed with their local tax office and the Colorado Department of Revenue.

    Provided below is a summary of the primary requirements for vacation rental regulations in the Telluride area. For a complete listing of requirements, please contact VRS (970) 728-4202 (email VRS) or your local governmental office, Town of Telluride (970) 728-2175 or Mountain Village (970) 369-6408.

    *County considering regulations
    **Three rentals per year for maximum of 29 days in residential areas

    Given the significant penalties of non-compliance combined with state and local governments’ heightened interest in collecting tax revenues, it only makes sense for homeowners to become compliant. At VRS we want to take the hassles out of ensuring your property is compliant with state and local regulations, which is why we offer an affordable Rental Compliance Plan. For a low monthly fee of $65, VRS can provide peace of mind that your property meets the requirements.

    Colorado Ski Towns Turn to a Controversial High Tech Solution to Identify Rogue Homeowners

    Thursday, December 20th, 2012

    Compliance is nothing new in the vacation rental industry, but recently it has taken a surprising twist. To identify vacation rental homeowners who are not paying lodging taxes, several Colorado towns have resorted to a controversial high-tech tool known as “scraping.” The towns have engaged a company that uses computer software to extract information from vacation rental websites, which is then compared to municipal databases to identify non-compliant vacation rental homeowners.

    Homeaway, parent of VRBO, has taken an aggressive position on this issue arguing that “scraping” violates a “fundamental privacy right” between the company and the homeowners who advertise on its sites.

    
Setting aside for a moment the ethical and legal issues, this clearly signals that local governments are prepared to consider extraordinary means to identify vacation rental homeowners who have not obtained business licenses to rent their property and are not paying lodging taxes. As municipalities struggle to balance budgets they are increasingly concerned about losing tax and license revenues from the growing number of owner-managed vacation rentals.

    The days of vacation rental homeowners flying under the radar and ignoring state and local laws and ordinances are clearly numbered. Given local governments increased attention to this issue and the associated penalties, the risk of non-compliance is simply too great to ignore.

    At VRS we know that compliance is a hassle for busy homeowners. We also accept that it has become a requirement of vacation rentals, which is why we offer a Rental Compliance plan. This is an affordable way for you to comply with local and state tax codes, and reporting requirements. For a low monthly fee of $65, VRS will ensure that your property is compliant with state and local vacation rental ordinances.

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    If you could keep as much as 65% more rental income without sacrificing on service - why wouldn’t you?

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    P.O. Box 2969 | Telluride, CO 81435