LIEB BLOG

How current events impact your business and real estate holdings

Showing posts with label rental income. Show all posts
Showing posts with label rental income. Show all posts

Saturday, January 19, 2019

Rental Real Estate Safe Harbor - Tax Law

On January 18, 2019, the IRS issued the safe harbor for rental real estate to be treated as a trade or business for purposes of IRC 199A's Qualified Business Income 20% deduction.

Real etate professionals, who operate "a rental real estate enterprise... [which is] an interest in real property held for the production of rents and may consist of an interest in multiple properties," should study the safe harbor closely as it can make a huge difference in your pocketbook. Interestingly, while multiple properties may qualify as the same enterprise, "[c]ommercial and residential real estate may not be part of the same enterprise."

According to the IRS, the safe harbor requires:

(A) Separate books and records are maintained to reflect income and expenses for each rental real estate enterprise;
(B) For taxable years beginning prior to January 1, 2023, 250 or more hours of rental services are performed (as described in this revenue procedure) per year with respect to the rental enterprise. For taxable years beginning after December 31, 2022, in any three of the five consecutive taxable
years that end with the taxable year (or in each year for an enterprise held for less than five years), 250 or more hours of rental services are performed (as described in this revenue procedure) per year with respect to the rental real estate enterprise; and
(C) The taxpayer maintains contemporaneous records, including time reports, logs, or similar documents, regarding the following: (i) hours of all services performed; (ii) description of all services performed; (iii) dates on which such services were performed; and (iv) who performed the services. Such records are to be made available for inspection at the request of the IRS. The contemporaneous records requirement will not apply to taxable years beginning prior to January 1, 2019

To claim the safe harbor, "include a statement attached to the return on which it claims the section 199A deduction or passes through section 199A information that the requirements in Section 3.03 of this revenue procedure have been satisfied."


Tuesday, May 23, 2017

Top 10 Questions for Landlords to Ask Themselves Before Leasing to a Friend

Many homeowners on the East End rent out their property for various parts of the summer season in order to recoup their carrying costs on the property and to have an additional source of income. Some even rationalize their initial purchase of their vacation home by calling it an investment property, where they plan to designate a set period of time that the property will be used for investment purposes and another limited time where it’s designated for pleasure. So when a friend asks to rent this vacation property, knowing of its availability, it may sound like a godsend: you can have an easy experience, avoid using a real estate broker, and save on brokerage fees while also helping out a friend who will love your property as you do. However, before letting your friend lease your property, you need to ask yourself: do I want to lose my friendship with this prospective tenant if the rental doesn’t work out?
If your answer to this question is that it’s completely inapplicable to you because your plan is to simply allow your friend to live at your expense and you have no problem with the financial burden resulting from the lost income stream, you should nonetheless consider possible liabilities that your friend can cause you. Beyond the liabilities of town/village code violations for noise violations, parking violations, rental permit violations, and so on, there is property damage and don’t forget feeling unappreciated when you are doing a good deed.
Regardless, all landlords should ask themselves the following questions before just jumping to the conclusion that renting to a friend is a good idea:

Thursday, December 03, 2015

Reasons to Involve an Attorney in the Rental of an Accessory Apartment

There is a strong temptation for homeowners to rent out the extra space in their home for a few quick bucks on the side, but long gone are the days where being a part time landlord was as easy as posting a classified ad in the newspaper and watching the monthly rent checks roll in. 

With the continuing evolution and advancement of tenant protection laws, it is critical that a landlord runs the rental of their accessory apartment in the same way that they would run a business. One of the biggest differences between a professional and someone who dabbles in a field is the thorough understanding and appreciation of the risks their business faces. 

This article focuses on a few key developments in landlord-tenant law that all mom-and-pop landlords should be conscious of in order to avoid turning their part-time supplemental income into a big time hole in their pocket.

Tuesday, September 01, 2015

Top 5 Risks For Airbnb Landlords

It may seem homeowners have a money tree at their house. It’s easy, just rent your house for the weekend and the dollars will shake into your bank account. Better yet, companies like Airbnb can facilitate the process and get landlords timely and secure payments, right? Making money is never so easy. Here are five risks of using Airbnb. In each, you need to decide if an Airbnb host is a residential property landlord or instead a hotel operator, in order to understand your exposure.

Read the full article by Andrew Lieb, Esq. here. 

Thursday, June 04, 2015

Relative Matters: Thinking of Letting a Family Member Stay at Your Hamptons Estate?

If you are counting on rental income, you cannot let a relative stay at your place, even for the weekend.

Read Andrew Lieb's latest article in Behind The Hedges to find out why.

Wednesday, September 10, 2014

Why Not to Rent Property to a Family Member

Before letting a family member stay at your house, read and share Andrew Lieb's latest article published in the New York Section of the Huffington Post.

The answer depends on two very important factors:
  1. Do you really need the money from your rental?
  2. Are you actually related to your family member?

The comprehensive article is available through the following link. Full Article