23rd Apr, 2015

News: Taxes on Vacation Rentals Fredericksburg Texas Homes

News: Taxes on Vacation Rentals Fredericksburg Texas Homes

Glorious getaways into the Texas Hill Country, Fredericksburg Texas homes often double as vacation rentals.  Buyers acquire these income-producing properties as investments.  At Sage Texas Premium Real Estate, we are familiar with options to invest in one of many charming bed and breakfasts or Fredericksburg Texas homes for vacation rentals, albeit some are not rented out enough of the year to produce a profit.

Fredericksburg texas homesSome potential vacation-home buyers and existing owners of Fredericksburg vacation home rentals may be unaware of a recent tax developments.  They arose out of the results of Tax Court cases in 2013 and 2014.

New Income Taxes on Texas Vacation Home Rentals

According to Dr. Jerrold J. Stern’s article published by the Real Estate Center at Texas A&M University in the April 2015 issue of Tierra Grande Magazine, the latest tax rules pertaining to Texas vacation home rentals boil down to three points:

  1. The acquisition of vacation home rentals may help lower overall income taxes for property owners.
  2. If property owners are using rental properties for personal enjoyment, the tax benefit may be reduced.
  3. When vacation rental homes are sold, a new 3.8% surtax will be levied on unearned income.

What is Deductible?

Several deductions can be taken if a Fredericksburg home is used as a vacation rental.  These include mortgage interest, real estate taxes and a proportion of expenses.  Expenses include fees paid to property management companies, utilities, maintenance, and tax depreciation.

Sometimes the expenses may not be deducted.  If the number of days used by the owners exceeds 14 days or 10% of the number of rental days, then both the rental income and the related expenses are ignored for tax purposes.

Even when the property owner stays within these 14-day/10% limitations, the rental property expenses may only be deducted up to the amount of the total rental income.  If the expenses exceed the rental income, those expenses may be carried over into the next year’s totals.

This is just a glimpse of the intricacies of the rules governing taxes on vacation rentals.  That’s why it is imperative for rental property owners to confer with tax accountants and to keep excellent records.

Fredericksburg Texas Real Estate Agents

For more information about Fredericksburg Texas homes for sale and other properties in Gillespie County, including homes, vacant tracts, and ranches, please contact Dale Cook of Sage Premium Texas Real Estate in Fredericksburg at 830-997-1035.

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