Having rental property can act as a useful way to earn an extra income. Some Oregon residents with multiple properties may even be able to utilize their real estate investments as their main source of income. Of course, you may not feel ready to leave your current job in order to rent out property, but you may feel ready to rent your vacation property out to others a few times a year.
Though you may look forward to putting your property up for rent through a service like Airbnb, VRBO or others, you may want to remember that you hold the responsibility of handling the taxes associated with the income earned from your rentals. If you do not keep this in mind, you could end up in a difficult spot come tax time.
Records, records, records
When you rent out your property, even for a short period of time, you are essentially conducting a business transaction. As with any type of business endeavor, you want to maintain thorough records. These records can include the dates someone rents the property, how much you earned during the rental period and your business expenses. This information and more will come in handy when the time comes to report your income and your deductions.
Fill out appropriate tax forms
Again, renting your vacation property is like running a business. As a result, in order to properly report your rental income to the IRS, you will need to fill out a W-9 form. This form will allow you to obtain a Taxpayer Identification Number from the IRS. Having this form and a TIN may prevent the rental service you utilize from withholding a substantial amount of your rental income, which could be as much as 28%.
Do not forget self-employment tax
In most traditional employment settings, your employer withholds funds associated with Social Security and Medicare. However, when you work for yourself, you have the responsibility of paying into these programs, which is self-employment tax. These taxes come in conjunction with the taxes you must pay on the income you earn from your rental.
It can get complicated
If you have never worked for yourself before, you may not fully understand just how complicated handling your own taxes and withholding can be. As a result, you may want to seek help on handling these matters from someone experienced in this area. An Oregon tax attorney could help you understand what information related to your rental property could affect your taxes as well as help you file your taxes when the time comes.