District folks renting out houses and apartments for inauguration-week are by now aware that the DC government has decided not to assess sales tax on those transactions. But sales tax isn’t the only way to end up owing a percentage of inaug-rental profits to the local tax office. There’s also income tax.
Online real estate publication UrbanTurf, in a November article, tells its readers that “money made on temp rentals is subject to taxes and should be reported on your individual income tax return. However, many people will probably toss these laws and regulations aside.This week presents too good an opportunity to fly under the radar and make a chunk of cash that will pay your rent for the coming months.”
But contacting the DC tax office reveals that any coming inauguration housing boom is unlikely to inspire area residents to “fly under the radar” by committing tax fraud, as there will be no reason to. According to an announcement sent out by tax office spokesperson Natalie Wilson:
“District residents renting transient accommodations for the Inauguration celebration who are not required to file the D-30 are also not required to report their receipts as gross income for District of Columbia income tax purposes to the extent they are not required to report such income for federal income tax purposes.”
In other words, the District tax office will only ask temporary-hoteliers to report their profits if the federal tax office does. And what are the chances that the IRS will? Slim. IRS spokesperson James Dupree points out the following passage in “IRS Pub 527, “Residential Rental Property” as speaking to the issue.
“Exception for minimal rental use. If you use the dwelling unit as a home and you rent it fewer than 15 days during the year, do not include any of the rent in your income and do not deduct any of the rental expenses.”
So fourteen days or under, no tax. But, Dupree cautions, “since every situation is different, there are undoubtedly going to be situations where the income needs to be reported in full and any deductible expenses are limited.”
*photo by Daquella manera