Sumary of These summer activities can impact next year’s tax situation:
- “When you formally rent your space to another person who pays you, you may generate taxable income that must be added to your Form 1040, just as you report wages, dividends, interest and stock sale profits,” said Kathryn Hauer, a certified financial planner with Wilson David Investment Advisors in Aiken, South Carolina.
- More from Personal Finance:How to tap your house for cash as home prices soarHere’s why you need to insure your next tripHow to generate a tax-free income in retirement”If you’ve been a lucky landlord, that income could be sizable,” Hauer said.
- To figure out whether you need to report the income — regardless of whether the rental involves your primary home or a vacation home — count up the days in the calendar year that you rented out the space.
- For instance, the top federal income tax rate of 37% kicks in at $523,601 for single filers.
- Yet for married couples filing a joint return, that rate is applied to income above $628,300. The Tax Policy Center has a marriagecalculator that lets you plug in details of your and your partner’s financial life — wage income, business income, children you claim as dependents, etc.