NPR’s Social Media Experiment

Huddleston Tax CPAs is an accounting firm in Bellevue, Redmond and throughout the greater Seattle area.

This is Lauren Katz: https://twitter.com/laur_katz. She works for NPR and it was her idea to see what would happen if NPR “swapped humans for robots” late last month.

Katz’s idea came from manually tweeting out select stories from NPR’s RSS feed at night after they’d already been tweeted by the automatons. Apparently, people pick on the human touch and she noticed increased engagement with her manual tweets. This positive reception convinced her that livetweeting NPR’s entire tweeter feed for 5 days would be a good idea.

 

npr for redmond blog

 

“During the five days of manual updating, there were 142,219 visits to NPR’s website from @nprnews tweets — a 45 percent increase from the average (98,213) of the five weeks leading up to the experiment … Links tweeted by @nprnews were clicked on nearly 100,000 more times than links shared automatically the week before, information from its bit.ly account revealed. And the account gained 5,010 followers — about 14 percent more than the week before.”

Those are amazing numbers … and certainly a great PR stunt … which obviously you can’t rule out as a factor in the spike of followers and retweets, but a 45% increase? That’s huge, and more importantly it’s entirely organic and sustainable. Those followers, after all, were picked up fair and square–with engaging content.

There were some drawbacks, of course … Primarily, the drain of livetweeting for a national news organization “every eight to 10 minutes.” Katz said:”…I found it really hard to write human tweets and keep up with everything else I was doing. I did it, and we were there all week, but it takes more manpower if we want to continue it.”

The real question then is how practical is it to continue with livetweets? What do you think? Leave us a comment in the comment section …

If you enjoyed this article, why not follow us on Twitter and friend us on Facebook while you’re at it? You can always expect interesting, engaging content on our blogs geared towards educating our clients and contributing to our online community.

Source: http://www.niemanlab.org/2014/05/its-alive-what-npr-learned-from-turning-its-nprnews-twitter-account-from-a-bot-into-a-human/

Tax Credits for Landlords

This particular article of the Landlord’s Tax Guide focuses on the different types of tax credits available to landlords who rent out their property. A tax credit is better than a deduction because it is a one-for-one reduction of tax owed, while a deduction simply reduces the total amount of income that is taxable. This article will focus on two particular credits: the Rehabilitation Tax Credit and the Low Income Housing Tax Credit.

Note: None of the tax credits associated with installing energy efficient appliances or products are applicable to rental homes.

Rehabilitation Tax Credit

This credit is a bit obscure, but may be very useful in certain situations. The credit is available as ten percent of qualified rehabilitation expenditures if the building is not a certified historic structure, and twenty percent of expenditures if the building is a certified historic structure. In order to be a certified historic structure, the building must be either listed in the National Register, or located in a registered historic district certified by the Secretary of the Interior as being of historic significance to the district. Otherwise, the ten percent credit is available if the building has been substantially rehabilitated, the building was placed in service before the beginning of the rehabilitation, the building was first placed in service before 1936, and the rehabilitation process left intact a certain percentage of the original structural framework of the building. “Substantially rehabilitated” means the expense of rehabilitation exceeds the greater of your adjusted basis in the building or five thousand dollars.

Low Income Housing Credit

The IRS allocates housing tax credit to state agencies each year. Those state agencies then award the credits to developers of qualified projects in a competitive bidding process. To be eligible, a proposed project must commit to one of two occupancy threshold requirements; restrict rents, including utilities, in low-income units; and operate under these restrictions for thirty years or longer. The occupancy threshold requirement must be either: 1) twenty percent of units must be rent restricted and occupied by households with incomes at or below fifty percent of the area median income as determined by the Department of Housing and Urban Development, or; 2) at least forty percent of the units must be rent restricted and occupied by households with incomes at or below sixty percent of the area median income. The limits on tenant-paid rent are based on a percentage of area median income, and adjusted for household size. This program may be combined with a program like Section 8 in order to allow the landlord to collect full market rent, with the tenant only paying the maximum rent allowable to continue tax credit eligibility.

Note: Given the complex nature of these tax credits, please consult a tax attorney or CPA before proceeding.


Redmond CPA John Huddleston has written extensively on tax issues for small business owners. Since 2002, he has owned his own small business, Huddleston Tax CPAs. He holds a law degree and a masters in tax law, both from the University of Washington School of Law.

Private Use of Rental Property

The guidelines associated with the personal and leasing utilization of premises are included in this article in the Landlord’s Tax Guide. This may be either because you are leasing out a space in the same property which you are living in, or you have got a vacation residence that you might privately employ a few weeks out of the calendar year and rent the remainder of the time. This information will not apply to you at all if you never use your rental property for personal use. However, if you do, you will want to keep reading.

Property rented for less than fifteen days. Any time you leased your property for less than fifteen days total in the past year, you don’t have to file any of your rental revenue. If this is the scenario, then the real estate property is going to be considered personal for taxation considerations, and on Schedule A of Form 1040, it is possible to deduct any of the property associated expenditures as personal.

Employing Your Holiday Home as a Part Time Rental

Personal use test. It’s important to work with some type of numeric formula to determine the total number of days during which the rental property was used for personal use. That is the personal use test. How you deduct your rental expenses is going to largely be determined by whether or not the personal use test is satisfied. Finding out the actual quantity of days in the past year in which the real estate property was leased out at fair market value is the initial step in calculating the personal use test. The next step is to multiply that number of days by ten percent. We will label the outcome the “total days rented” or “TDR” for short. The next stage will be to figure out how many days the rental property was employed for private use. We can label this “personal use days” or “PUD” abbreviated. Look at the table below for a vision of the personal use test.

NOTE: “Personal use” consists of use by you, any other owners of the home and property, plus the families of all individuals who own the property, unless of course your family member is paying out rent at fair market value.

If TDR is…

and PUD is…

then the personal use test is…

over 14

less than TDR

not satisfied

under 14

less than 14

not satisfied

over 14

more than TDR

satisfied

under 14

more than 14

satisfied

 

If test is satisfied. If the personal use test is satisfied, you will deduct your rental expenses only to the extent of the rental income. A net rental loss will not be attainable, but when there are any additional expenditures you do not write off this year, they can be moved forward to later years, provided that there is an adequate sum of rental earnings in the tax year in which you claim them.

If test is not satisfied. Your own leasing costs will never be restricted by the rental income if the personal use test is not satisfied. You could deduct your rental costs and also have a net rental loss. There could be a few passive activity rules, however, which may still restrict the rental loss tax deduction.

Computing all of your rental expenditures. A number of expenses should be allocated between leasing and personal application. These include expenditures that will have already been charged no matter the use, such as real estate taxes and mortgage interest. Find out the whole number of personal use days. Then, you will need to determine the total quantity of TDR. After that, divide rental days by the sum of PUD and rental days. The end result is the rental percentage. Finally, you have to multiply the total cost of your expenses by the leasing percentage that you have established, and then the result will be the rental deductible part.

Leasing a Section of Your House

You need to expressly allot all your costs in between private usage and leasing use if you rent out a part of your own personal home. The IRS allows a little versatility with the method you employ; just make sure it’s consistent from year to year. Some people choose the option of taking the number of rooms within their residence along with the number of rooms within the home, and divide them. Dividing the rented sq . ft . by the residence’s total sq . ft . is another option that lots of people go for. You’ll end up with rental costs and personal costs. Those allotted to the leasing income can be deducted as such, and you can use Schedule A of Form 1040 to deduct what’s left.


Redmond CPA+John Huddleston has written extensively on tax related subjects of interest to small business owners. He is the owner of his own small business, Huddleston Tax CPAs. He is a graduate of Washington State University and the University of Washington School of Law.

For more information on rental property deductions check out this video from Huddleston Tax CPAs:

Tax Deductible Rental Property Expenses: Insurance, Cleaning/Maintenance, and Repairs

Since you now are currently renting property to obtain income, it is vital to ensure that a number of fees and professional services are correctly set up and documented for IRS purposes. Below, we’ll name a few of these fundamental expenses.

Insurance

Insurance payments are pre-paid ahead of the given period of time. An illustration here would be: you purchased insurance protection for this specific rental property on March 2012 for $1200. The protection time period is from April 2012 to March 31, 2013. Since the insurance coverage timeframe does extend past the current tax year, you have to apportion and allocate the insurance premiums pertinent to this present tax year only and carry forward the balance for the upcoming reporting period. This means that $900 (9 months April to Dec 2012) or $100 per month of qualified rental utilization will be your tax deductible premium.

Note that some Insurance companies frequently bundle insurance premium plans between personal and business clients for a mark down charge. Only the company rental property pertinent part will be deducted. You need to use your individual income tax return to write off any non-business or personal use. Lastly, Title insurance isn’t suitable as an expense and must be inside the Cost Basis of the property.

Cleaning and Maintenance

If it’s related to daily cleaning and repair of general spaces, then everyday maintenance of the property is an authorized expense. Even so, the costs are only allowable when they are not on personal use days, but are on permitted rental days. Many property owners get long term contracts with local services to keep up the rental property on a continuing schedule to ensure it’s in running and useable order. This could include such expert services as window cleaning, dusting furniture, cleaning home appliances and general maintenance. Just these sorts of expert services are permitted, any major structural improvements and/or changes will have to be allotted to the Cost Basis of the rental property.

Repairs

From time to time, there will probably be some sort of necessity to mend an appliance, touch up a bit of painting, or some kind of endeavor which doesn’t call for a major reconstruction of the property structure. Depending on the leasing period, you’ll be able to write off these required and typical expenses.

Don’t include any kind of periods which will be looked at to be individual use days, because expenses are only allowable in relation to the earnings of the property. The only expenditures which are deductible are those which are related to the authorized rental time period, specifically.

  • You can obtain the various forms outlined in this article on the IRS’s site. Reference IRS Publication 527 for additional information.

Redmond CPA+John Huddleston has written extensively on tax related subjects of interest to small business owners. He is a graduate of Washington State University and the University of Washington School of Law.

Deductible Motor Vehicle and Local Transportation Expenses Related to Rental Property

If your specialized travel expenses are regular, needed, and reach some factors, they may deducted. If you use your automobile to take care of, and operate the leasing residence, as well as recover profits from inhabitants, you will be allowed to write off these expenses. Because commuting to work is a personal expense, it’s not allowed for deductions. Besides that, you will not deduct the cost of commuting away from home to improve the premises. This is usually recoverable under a cost recovery system such as depreciation.

Actual Expenses

Using this method you’ll report all of the expenditures regarding travel in connection with your rental property. IRS Publication 463, Chapter 5 describes just how all of these business expenses have to be documented and backed up with receipts. You need to have a touchable record to backup any tax deductions, but it is a good idea to back up files with software program applications obtainable from iPod, Quick Books, Mint, as well as others. You need to claim this with your Schedule C or Schedule E. If you’ve got two or more rental properties, your business expenses must be allocated to the individual premises where costs were accrued. Only vehicle use associated with the property is allowed for deduction, so please remember never to add in any private costs.

Mileage Method

Here you may write off your actual miles traveled. For instance, if you traveled twelve hundred miles in the course of 2012, you’d implement the present standard mileage rate of $0.55.5 per mile based on current taxation rates.

You will need records to help support local travel such as motor vehicle rentals, metro bus companies, and Zip Cars that you declare directly linked to the real-estate. To show that the public transportation use is only business related, it is advisable that you maintain records tied to a business account related directly to your rental property business.

Quick Note: You can obtain the different documents outlined in this information on the IRS’s webpage.For more info please check with IRS Publication 527.

Redmond CPA+John Huddleston has written extensively on tax related subjects of interest to small business owners. He is a graduate of Washington State University and the University of Washington School of Law.

Mandatory Tax Documents Concerning Reporting Rental Activity

This particular brief article discusses the various Internal Revenue Service tax documents you need as a property manager to be able to properly account for, and report, your rental property profit to the IRS. Depending on the kind of legal body that owns the rental, the tax forms needed will vary, as is laid out just below (individual, partnership, corporation, or LLC). View the page called Best Rental Property Ownership, included in this Guide, to get more details concerning legal entity rental property ownership.

Quick Tip: You’ll find the various forms outlined below on the Revenue Service’s webpage: http://www.irs.gov/Forms-&-Pubs. The various necessary forms will undoubtedly be contained in any tax preparing software, if you use one of them.

Individual Ownership

Shared ownership with a wife or husband, shared tenancy with right of survivorship, along with tenancy in common will be included.

Form 1040. Foremost, you must have Form 1040, the form submitted by all independent tax payers. The net rental property earnings or losses subjected to tax will be at line 17 of the very first page in Form 1040. Please be aware that as a law abiding property manager with rental property activity, you aren’t allowed to utilize the shortened Forms 1040A or 1040-EZ.

Schedule E. The addendum to Form 1040 that you must be familiar with is Schedule E. Of Schedule E’s diverse purposes, only the use of reporting rental property profits and expenditures is useful to your needs. The only portion of Schedule E you have to fill in is the segment entitled as “Part 1″. Different essential notes to remember: when you own the rental jointly with anyone other than your husband or wife, report only income you collected plus the expenses you sustained. Furthermore, do not forget that if you rented for only a part of the entire year, or you are actually leasing a section of your own private house, you need to keep track of your expenditures regarding rental and non-rental purposes. To get more tips, check out Tax Deductible Rental Property Expenses, the article collection that is included in this Guide.

Form 4562. Form 4562 must be used to determine depreciation of your rental property, that you can deduct on line 18 of Schedule E. To get more advice, see the article titled, Depreciation Expenses for Rental Property, that is included in this Guide.

Partnership/Corporate Ownership

A general or limited partnership or S corporation is included.

Form 1065/1120-S. For people who have a joint venture, you have to use Form 1065, the form a partnership uses to report everyone of its company activities. Form 1120-S is used by an S corporation to report company operations. Schedule K, line 2 of Form 1065 or 1120-S is where your annual net rental property loss or profit will be reported (Schedule K is embedded in the documents).

Form 8825. This document operates like Schedule E, but is for partnerships and S corporations. It’s basically similar to Schedule E. Make sure you disclose complete amounts of all earnings and costs suffered by the partnership or corporation (these are divided among each business partner or shareholder in the future).

Schedule K-1. The net rental income or losses due to each investor or partner is reported by this tax form, as outlined by the ownership interest of each shareholder or business partner. Each individual partner is provided with his or her own personal K-1 and must report the elements of that K-1 on her or his Form 1040, Schedule E, Part II.

Limited Liability Co-ownership

You can file as if you are an independent property owner since, for tax requirements, a single-member LLC is a disregarded entity (see above). A multiple-member LLC may choose to be taxed as either a partnership or as an S corporation (look above).

Auburn CPA+John Huddleston has written extensively on tax related subjects of interest to small business owners. He is a graduate of Washington State University and the University of Washington School of Law.

Home Office Deductions for Landlords

Many are leery of home office deductions, concerned that these deductions are more likely to spur an IRS audit. The IRS claims there is no meat to this. Regardless, follow the rules and you should have no concerns.

To claim this deduction you must be active (beyond depositing monthly checks). If you routinely spend a substantial amount of time maintaining and preparing properties, you will likely fit the term “active”.

If you’ve met this requirement you will also have to meet the basic home office deduction thresholds. Firstly, you need to use the home office exclusively for your rental business on a regular basis.

Additionally, you must meet one of the following requirements:

1. This office must be your principle space for the day-to-day running of your business.

2. You must have no other location from where you run the administrative end of your property managment rental business.

3. This space also serves as meeting location for your clients.

4. You use a separate structure on your property for conducting business.

After you have applied these threshold tests and determined that the work area in your home does in fact qualify for the home office deduction, you will have to look into what kind of expenses are tax deductible. There are direct and indirect types. Direct expenses solely benefit the home office area of your home, expenses such as cleaning or painting. Indirect expenses benefit the entire home and must be apportioned out between the office space and the rest of your house. Property tax, insurance, mortgage interest, and utilities are typical examples of indirect expenses. Square footage is the common technique of figuring out the proportion of the home office in relation to the entire house to come up with a percentage. A 2,000 square foot house with a 200 square foot home office area would mean 10% of the indirect expenses could be written off as part of the home office deduction. You can also depreciate the house structure (not the value of the land) in the same percentage over 40 years. However, this may complicate matters if the house is sold.

And you will want to ensure that you are keeping diligent records in case there is an irs audit. You will need to be able to prove that you were entitled to any deductions. A diagram and/or a photo will support your claim of square-footage ratios. It is wise to have your home office address listed on business cards, letter heads, or other forms of communication. And when using your home office to meet renters, it is wise to keep a record of meetings. You should keep insurance premium notices, mortgage interest statements, property tax statements, utility bills, and other appropriate expense statements.

Home office deductions can get complicated. Please do not consider this to be reasonable solution to the informed counsel of seasoned Redmond Accountant. But this should help you gain a basic understanding the requirements of successfully claiming home office deductions.

Bellevue CPA +John Huddleston has written extensively on tax related subjects of interest to small business owners. He is a graduate of Washington State University and the University of Washington School of Law.

 

Part 1: Tax Deducible Rental Property Expenses

This segment the Rental Property Tax Guide concentrates on the various types of expenses that you may deduct from your gross rental income in order to determine your net rental income. Because there is a variety deductible expenses, this guide breaks down this series of articles into four different forms. This first chapter will target interest, advertising, and professional fee expenses.

Interest

The primary type of interest you will most likely be deducting is interest on the mortgage. If you are renting the property as its own living unit, you can deduct all of the mortgage interest you paid on Schedule E. Whereas, if you’re renting a room in your home, or if it’s a duplex and you are occupying the other unit, then you’ll have to pro rate the mortgage expense. For more on personal use, see the article entitled Personal Use of Rental Property, which is included in the Tax Guide for Landlords. Personal use mortgage interest always goes on Schedule A of your Form 1040 and not on Schedule E. Also, if you own only a part interest in the rental, you must multiply the total amount of mortgage interest paid on the property by your ownership interest. Be aware, however, that certain expenses you pay to obtain a mortgage (such as title/recording fees and commissions) are capitalized as part of your depreciable basis for the property, and are not expensed. See the article titled Depreciation Expenses for Rental Property, included in this Guide, for more on depreciation expense. Other types of interest may also be deductible, if you incurred the interest solely for the benefit of the rental property. For example, if you took out a personal loan in order to replace carpeting, or fix the roof.

Advertising

Any fees you incur to promote your rental property and list it on the open market are deductible. For example, advertisements that you pay for from a local newspaper, or any expenses in online advertising, are deductible.

Professional Fees

If you pay legal counsel to write a rental contract or start court actions to be able to evict a tenant, it’s possible to deduct these payments. Also you can deduct the fees of an accountant for preparation of the Schedule E of your tax return from the year before. Make sure to pro rate the total fee between the rest of your return versus the Schedule E portion of you return based on time spent. Any fees unrelated to the Schedule E appear on Schedule A as personal tax preparation expenses. Also any management fees or commissions to realty groups for managing your property are deductible as well.

CPA has written numerous articles on accounting and other tax related subjects of interest to small business owners. He holds a Masters in Tax Law from the University of Washington.

The Deductions in Rental Startup Expenses

Some expenses incurred in preparing a property for rental (before actually renting) are tax deductible. So let’s look at a few of them.NOTE: These expenses outlined within this post aren’t the same variety of expenses allowable as a deduction under Internal Revenue Code section 195. Under the section 195, certain startup expenses (in an active trade or business) are deductible up to $5,000 with a balance amortizable over fifteen years. However, section 195 is inapplicable to rental property because renting isn’t regarded an active trade or business, but rather it is considered a passive activity. Find a great deal more information on active versus passive rules in the Tax Deductible Rental Losses article.

Note: It is not just once you have actually rented real estate that rental activity commences, but when you have made the property available for rent.

The Expenses of Obtaining a Mortgage

Recording fees, mortgage fees, and abstract fees (amongst others) are capitalized and so become part of your basis in the property. Instead of expensing these fees all at once, you have to depreciate these expenses. The article Depreciation Expenses for Rental Properties has further information relating to depreciation.

Points

What are points? They are charges paid by a borrower to take out a mortgage or a loan. This points or charges may also be called origination fees, or premium charges, or maximum loan charges. Points are essentially prepaid interest. Thus, they are deductible as interest, but you cannot deduct the full amount at once. Rather, you must amortize the points over the life of the loan. Determining the amount of points to amortize per year, is task beyond the scope of this article. Schedule a date with a tax pro.

Improvements vs. Repairs

You need to capitalize and depreciate improvements to the property previous to putting the rental property on the market. Improvements prolong the use of the property or materially add to the property’s market value. On the other hand, you may freely deduct all repair expenses. A repair aims to keep your property in good working condition, not to increase the market value or prolong use.

Certified public accountant has written numerous articles on accounting and other tax related subjects. he is a graduate of Washington State University and the University of Washington.

Ownership of Rental Properties

Let’s focus on the possible entity types as they relate to rental property ownership. In later articles we will move on to look more microscopically, but for now let’s make sure you are starting from a strong base. You’ll see below the different entity selection types have pluses and minuses. As a guideline, the aim is to limit liability and protect your property from unsecured creditors.

When establishing an entity, you will need to visit SOS.WA.GOV to register.

TIP: Always consult an attorney or Redmond CPA prior to establishing an entity and transferring ownership of a rental property to it. This Guide is just not meant to be an all-in-one solution you should seek the attention of a qualified professional.

Individual Ownership

This form of ownership is the most common and the most straight forward form of ownership and occurs when you purchase the rental property in your own name. This includes owning the property with your spouse, or as joint tenants or tenants in common with someone else. The main benefit is that this is straightforward and simple, for one it does not require you to file any complicated paperwork or filing fees. The major disadvantage to this type of ownership is that your creditors could possibly force a sale of the rental property if they receive a court judgment against you, or force you into involuntary bankruptcy.

Legal Entity Ownership

Legal entities include limited liability companies, corporations, general partnerships, and limited partnerships. Let’s take a look at the difference a bit later. Now we’ll look at the leading benefit of entity ownership, and this would be that with entity ownership your personal creditors can’t force a sale of a rental property. The only entity type that does not require registration with the secretary of state is a general partnership. Regarding taxes, the entity type doesn’t matter that much because in most cases rental income is taxed on your personal tax return, or “passes through”, See the article titled “Necessary Tax Forms for Reporting Rental Activity,” which is included in the rental property tax Guide.

General partnership. The partnership is an association of two or more people to carry on as co-owners of a for-profit business. In a general partnership, each partner will have equal management rights, and are personally liable for the debts of the partnership. So, a general partnership is ordinarily not ideal.

Limited partnership. This entity is more complex than a general partnership because it requires at least one limited partner and a general partner. The general partner has sole management rights, plus personal liability for any resulting debts. While, the limited partner is not personally liable for debts of the partnership and also is without management rights.

Limited liability partnership/company. A limited liability company and a limited liability partnership are quite similar entities, both provide for limited liability to the partners/members. This means that you will not be personally liable for the entity’s debts, that is unless the debt is due to your own wrongdoing. This type of ownership is often preferable because of limited liability plus there are not as many formalities to observe than with corporations.

Corporations. Corporations enable perpetual existence and limited liability. Although, they also require the observance of particular formalities in order to preserve the limited liability protection. Without these formalities, a court mandate could very well “pierce the corporate veil” and hold you personally liable. It is for this reason that LLPs and LLCs are usually more desirable for a rental property owner. Additionally, for tax purposes, corporations are split into c-corps and s-corps. When the corporation is taxed as a “C” corporation, it will pay tax on rental income, and then you will pay tax yet again when the corporation pays you dividends. You should steer clear of this “double taxation” snare.

Redmond Accountant has written extensively on accounting and other tax related subjects. He is a graduate of the University of Washington School of Law, with a Masters in Tax Law and a Juris Doctorate.

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    We serve Tukwila, Auburn, Federal Way. We have a few meeting locations. If you are looking for a Redmond CPA firm, get in touch with us! Call to meet John C. Huddleston, J.D., LL.M., CPA, Lance Hulbert, CPA, Grace Lee-Choi, CPA, Jennifer Zhou, CPA, or Jessica Chisholm, CPA. Member WSCPA.