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Inauguration Rental Hosts May Get Tax Break

Big events bring big money to host cities. Free-spending visitors flock to the sites of Super Bowls, art and music festivals and, every four years, presidential inaugurations.

But it’s not just municipal treasuries that benefit. Residents who flee to avoid the hoopla can charge prime rates for a few days in their homes. For example, attendees of President-elect Donald Trump’s inauguration events could choose from more than 300 listings on Airbnb this week, averaging around $700 per night.

Even better, Airbnb hosts and other short-term landlords might not owe the IRS a cent. The federal tax code carves out an exclusion for profits from homes leased for two weeks or less. Here’s how it works.

Short-term rental rules

To take advantage of the tax exclusion, the property you’re renting out must be your primary residence, the one where you live during the tax year.

The 14 days of tax-free rental income is also available on a vacation property as long as you or a family member stay in it for at least 14 days during the same year or for at least 10% of the days you rent it, whichever is greater. Because you’re aiming for the tax-free rental income, this means you need to also stay in your mountain cabin or lake house yourself for two or more weeks.

Thinking of leasing only your spare bedroom during the celebration? That gets a tax-free OK from the IRS, too, as long as you rent the space for no more than two weeks.

The 14-day limit applies to the whole tax year, not each time you rent your home. A couple of weeklong events will get you to the limit quickly. 

You need to ask and receive a fair price for your home’s rent. The IRS defines this as the amount of rent that an unrelated person would be willing to pay. Of course, fair is fluid when it comes to scarce space and major events.

Potential pitfalls

Because you receive the short-term rent tax-free, you aren’t allowed to deduct related expenses, such as cleaning supplies to ready the property for visitors.

Keep close track of the days you lease your home. If you hit rental day 15, you must include all of your rental income when you file your taxes, not just the amount collected after the 14-day free period. And because you used the dwelling unit for personal purposes, you must divide your expenses between rental use and personal use. This means more record-keeping.

You’ll also have to determine which tax form to use. When you rent all or part of your main home or vacation home for 15 or more days per year, you normally report the income on Schedule E, Supplemental Income and Loss. That’s also where you can write off allowable expenses.

If, however, you provide substantial services to your guests, such as meals or cleaning the property during their stay, the IRS tends to view the rental as a business activity. In this case, you’ll report the taxable rent on Schedule C, Profit or Loss From Business, or Schedule C-EZ, Net Profit From Business. And you’ll probably owe self-employment tax. This additional 15.3% tax goes toward Medicare and Social Security. It’s required when you have business income of $400 or more.

» MORE: 10 tax forms you need to know before you file

If you rent your residence or a second home for substantial periods during the year, it’s a good idea to talk with a tax professional, especially one who specializes in rental properties. The amount you’ll save by submitting correct taxes will likely offset the price of the advice.

Watch out for local fees

Even if you don’t have to pay federal income tax on your rental earnings, you might be subject to local fees. Some states, cities and counties categorize home rentals like hotels and impose lodging occupancy taxes across the board.

The types of taxes and rates vary by jurisdiction, so ask local officials about your tax responsibilities when renting your home.

20 Edible DIY Projects

There's no time for DIY like these cozy, cool months.

Tax Benefits Of Parenthood

MoneyTips

Congratulations! You have just been handed your first little bundle of joy in the hospital and have embarked on the long journey of parenthood. It is a trip full of joyful experiences that make the corresponding aggravations worthwhile, and it comes with many benefits — some of which are tax-related. You can look forward to taking advantage of these child-related deductions and benefits. Standard Exemption – Every child that you can claim as a dependent decreases your taxable income. For the 2016 tax year, that amount is $4,050. The exemptions begin to phase out at an adjusted gross income (AGI) of $259,400 for single filers and $311,300 for married filing jointly. Earned Income Credit (EIC) – Designed to help lower income taxpayers, the EIC is a tax credit that is scaled along with income and the number of dependents claimed. See IRS Publication 596, "Earned Income Credit (EIC)" for details on qualifications and the scaling criteria. The maximum EIC amount for tax year 2016 is $6,269 for joint filers with three or more qualifying children, and that number will rise to $6,318 in 2017 (next year’s return). Child Tax Credit and Additional Child Tax Credit – For tax year 2016, each qualifying child can allow you to take a tax credit of up to $1,000 if your modified adjusted gross income (MAGI) is less than $110,000 for married filing jointly status, $75,000 if single or head of household, and $55,000 if married filing separately. If your tax bill was not large enough to take the full tax credit, you may be able to take the Additional Child Tax Credit, which is a refundable credit (meaning that it is a credit you can claim and receive as a refund even if you do not owe any taxes). Check out IRS Publication 972 for more information. Child and Dependent Care Credit – If you incur child care costs in order for you or your spouse to be able to work (or to look for work), you may be able to claim up to 35% of your child care expenses. The limit on the expenses that can be claimed is $3,000 for one child/dependent or $6,000 for two or more. That results in $1,050 and $2,100 in actual credit respectively. Education Credits – As your children get older, you may be able to take advantage of either the American Opportunity Credit (AOC) or the Lifetime Learning Credit (LLC) that applies to the costs of higher education — but you must choose between the two. The AOC can yield up to $2,500 in tax credits that are refundable up to 40%, while the LLC can provide up to $2,000 in credit but is not refundable. Details on qualifications and phase-out limits are available in IRS Publication 970, "Tax Benefits for Education". Tuition and Fees/Student Loan Interest Deductions – If you do not meet the qualifications for the education credits, you may be able to take the tuition and fees deduction, and you may also be able to deduct up to $4,050 in tuition and fees. Publication 970 also covers these deductions. Take special care to investigate the tax credits, because they are more valuable than deductions. Tax credits are subtracted directly from the taxes that you owe, while deductions only reduce your taxable income, and therefore reduce your tax bill by the percentage of your tax rate. For example, a $1,000 deduction lowers your taxes by $250 if you are in the 25% tax bracket, while a $1,000 tax credit lowers your taxes by the full $1,000. Who knew that your new addition to the family could bring you all these tax benefits? Don't forget about them come tax time — but in the meantime, simply get used to your new lifestyle and take the time to enjoy your new bundle of joy. Before you know it, he or she will be asking for the car keys… and then your insurance will go up! Photo ©iStockphoto.com/Choreograph

Originally Posted at: http://www.moneytips.com/tax-benefits-of-parenthood

Tax Benefits of Having Dependents

What to Do When Divorced Parents Both Want to Claim the Same Dependents

Many Do Not Claim Their Tax Refunds Each Year

Tax Benefits Of Parenthood

MoneyTips

Congratulations! You have just been handed your first little bundle of joy in the hospital and have embarked on the long journey of parenthood. It is a trip full of joyful experiences that make the corresponding aggravations worthwhile, and it comes with many benefits — some of which are tax-related. You can look forward to taking advantage of these child-related deductions and benefits. Standard Exemption – Every child that you can claim as a dependent decreases your taxable income. For the 2016 tax year, that amount is $4,050. The exemptions begin to phase out at an adjusted gross income (AGI) of $259,400 for single filers and $311,300 for married filing jointly. Earned Income Credit (EIC) – Designed to help lower income taxpayers, the

Mortgage Rates Jan. 19: Higher; Trump Could Repeal FHA Mortgage Insurance Premium Cut

Mortgage rates jumped substantially this morning. Thirty-year fixed rates rose by 10 basis points, and 15-year fixed rates rose by nine basis points, while 5/1 ARM rates saw a smaller bump at four basis points, according to a NerdWallet survey of mortgage rates published by national lenders on Thursday.

Mortgage Rates Today, Thursday, Jan. 19 (Change from 1/18) 30-year fixed: 4.41% APR (+0.10) 15-year fixed: 3.79% APR (+0.09) 5/1 ARM: 3.88% APR (+0.04) Trump could repeal FHA MIP reduction, according to reports

Reports surfaced yesterday about the possibility of the incoming Trump administration delaying, and even repealing, the latest FHA mortgage insurance premium reduction, which is slated to go into effect Jan. 27. The reduction, which would cut annual mortgage insurance premiums on most FHA loans by a quarter of a percent, was announced last week by the U.S. Department of Housing and Urban Development.

The insurance premium reduction is largely supported by housing industry professionals, and is estimated to save new FHA borrowers about $500 this year.

» MORE: How the Trump presidency will impact housing in 2017

Responding to the possible repeal or delay, National Association of Realtors president William E. Brown said in a statement to NerdWallet, “We’re disappointed having heard reports that the mortgage insurance premium cut was included in a wider regulatory freeze, but it’s important to remember that this policy wasn’t singled out. That leaves the door open to implement the cut in the near future.”

“According to our estimates, roughly 750,000 to 850,000 homebuyers would face higher costs and 30,000 to 40,000 new homebuyers will be left on the sidelines in 2017 without the cut,” Brown said. “For now, we believe that the benefits of the mortgage insurance premium cut will shine through during this review period so it can be quickly put back into place.”

A Trump transition spokesperson told Politico reporter Lorraine Woellert yesterday that a decision hasn’t been made yet on the insurance premium reduction.

“The incoming policy team has not seen the model the outgoing administration used, nor their analysis, and nothing was communicated to the incoming team before the announcement was made,” the Trump spokesperson told Woellert. “The new team looks forward to seeing the financials to ensure there is the right balance between encouraging sustainable home ownership at an individual level and protecting taxpayers against future losses to the entire program.”

“No determination has been made on this last-minute policy change by Secretary Castro that could detrimentally impact FHA’s reserves,” the spokesperson said.

Homeowners looking to lower their mortgage rate can shop for refinance lenders here.

NerdWallet daily mortgage rates are an average of the published APR with the lowest points for each loan term offered by a sampling of major national lenders. Annual percentage rate quotes reflect an interest rate plus points, fees and other expenses, providing the most accurate view of the costs a borrower might pay.

Michael Burge is a staff writer at NerdWallet, a personal finance website. Email: mburge@nerdwallet.com

Mortgage Rate Newsletter Get daily mortgage rate updates delivered straight to your inbox!

Retiring in 2017?

MoneyTips

Welcome to retirement! It's time to refocus and start the next phase of your life. Whatever your retirement goals may be, we wish you well — but first, there are a few changes in Social Security that we would like to bring to your attention. First, the good news: you will receive a bit more money in 2017 than if you had retired in 2016. Thanks to slightly rising inflation over the past two years, there is a cost of living adjustment (COLA) of 0.3% for 2017. That adjusts the average monthly payments across all retired workers from $1,355 to $1,360 beginning in January. Now, the bad news: that extra $5 or so a month that you receive will probably be taken right back in the form of higher Medicare premiums. If you are one of the 70% of Americans that will have his or her Medicare Part B premiums paid by deduction from Social Security benefits, the premium rise is expected to cancel out the average COLA. Easy come, easy go. The maximum possible benefit for anyone retiring at his or her full retirement age (FRA) increases by $48 per month in 2017 to reach $2,687 from $2,639. You could potentially increase this value if you choose to wait to claim your Social Security benefits, up until age 70. At that point, your payments cannot rise and it makes no sense to wait any longer. Another change for 2017 may force retirees to wait just a bit longer than in past years or accept a bit less in monthly payments. In 2017, the FRA begins a transition from 66 to 67 years old. The FRA is stretched out over six years with two-month increments added each year until 2022, when the FRA becomes 67 for everyone. If you were born in 1955 (thus turning 62 in 2017 and becoming eligible for Social Security benefits), this action could still affect you, because claiming your benefits early results in a lifelong reduction in the benefits that you receive and the earliest age of eligibility remains at 62. Now, instead of claiming four years early when you reach age 62, you will be claiming four years and two months early, reducing your benefits even further. If you are still working in retirement, there are two other issues to consider. High earners will see a significant increase in the amount of earnings that are subject to Social Security tax. The earnings threshold (the earnings point beyond which Social Security taxes do not apply) rises to $127,200 from $118,500. For self-employed high earners, it's a double whammy since you pay both the employer and employee portions of payroll taxes. It's more likely that you are concerned about the earnings test threshold, the maximum amount that you can earn before benefits are reduced. If you reach your FRA during 2017, you can bring in a maximum income of $44,880 for the year without having your benefits reduced. That represents a $3,000 increase over the previous year. Beyond that point, your benefits are reduced by $1 for every $3 that you earn above the threshold value. If you are receiving benefits in 2017 but will not reach FRA until after 2017, you could earn a maximum of $16,920 for the year without a benefit reduction (a $1,200 increase from 2016) and your benefits are reduced by $1 for every $2 you earn beyond that threshold. The New Year may bring even more Social Security changes. Depending on what the new Presidential administration and Congress decide to do, 2017 may be a year of extensive change for Social Security. It would be a good idea to keep up on the news during your retirement — but don't worry about things you cannot control. Make adjustments to your retirement plans if necessary, but don't forget that retirement is for relaxation and enjoyment. Let the free MoneyTips Retirement Planner help you calculate when you can retire without jeopardizing your lifestyle. Photo ©iStockphoto.com/NoDerog

Originally Posted at: http://www.moneytips.com/retiring-in-2017

Social Security 101

Avoid Taking Retroactive Social Security Benefits

7 Top Retirement Roadblocks

Retiring in 2017?

MoneyTips

Welcome to retirement! It's time to refocus and start the next phase of your life. Whatever your retirement goals may be, we wish you well — but first, there are a few changes in Social Security that we would like to bring to your attention. First, the good news: you will receive a bit more money in 2017 than if you had retired in 2016. Thanks to slightly rising inflation over the past two years, there is a cost of living adjustment (COLA) of 0.3% for 2017. That adjusts the average monthly payments across all retired workers from $1,355 to $1,360 beginning in January. Now, the bad news: that extra $5 or so a month that you receive will probably be taken right back in the form of higher

Donald Trump will have to downsize to move into the White House

Brianna Chambers contributed to this report.

Donald Trump's new Washington D.C. address will be a bit smaller than his popular Palm Beach, Florida estate. 

>> Read more trending stories  

When the president-elect and his family relocate to 1600 Pennsylvania Ave., they'll have slightly less room to roam than at Trump's iconic Florida property, Mar-a-Lago.

Photos: Donald Trump's Palm Beach Home, Mar-a-Lago

Trump has suggested that he intends to spend a significant amount of time at Mar-a-Lago, which he referred to as "the Winter White House" in a recent Twitter post:

Writing my inaugural address at the Winter White House, Mar-a-Lago, three weeks ago. Looking forward to Friday. #Inauguration pic.twitter.com/S701FdTCQu— Donald J. Trump (@realDonaldTrump) January 18, 2017

According to the Palm Beach Post, Mar-a-Lago was built by cereal heiress Marjorie Merriweather Post and opened for the 1927 winter season with 58 bedrooms and 33 bathrooms. Its name means "sea to lake," signifying the property's position stretching between the Atlantic Ocean and the Intracoastal Waterway.

>> See more of Trump's Mar-a-Lago estate here.

When Post died in 1973, she willed the estate to the U.S. government, but the government declined, citing Mar-a-Lago's high maintenance costs, the Palm Beach Post reported. According to Town & Country, annual maintenance costs totaled around $1 million.

Though the estate was declared a National Historic Landmark in 1980, it sat empty until Trump purchased it in 1985 for $8 million. Trump and his then-wife Ivana spent years restoring the property. Trump turned the estate into a private club in 1995 and built a 20,000-square-foot ballroom on the property, among other notable features.

The Mar-a-Lago club, which caps at 500 members, has a non-refundable membership fee of $100,000 and annual dues of $14,000, according to the club's managing director and executive vice president, Bernd Lembcke. Members are also required to spend $2,000 on food every year. 

Construction of the White House, home of every U.S. president since John Adams in 1800, began in 1792.

Here's how the two properties compare:

The White House

Year constructed: 1792 - 1800

Square feet: about 55,000 

Number of rooms: 132

Bedrooms: 11

Bathrooms: 35

Fireplaces: 28

Tennis courts: 1

Acreage: 18

Mar-a-Lago

Year constructed: 1924 - 1927

Square feet: about 110,000 

Number of rooms: 126

Bedrooms: 58

Bathrooms: 33

Fireplaces: 12

Tennis courts: 6

Acreage: 17

According to Realtor.com, the White House comes equipped with a jogging track, swimming pool, movie theater, bowling lane, half-court basketball court, horseshoe pitch, rose garden and military guard. Mar-a-Lago boasts a swimming pool, beach club, salon, croquet court, spa and concierge service.

Most Borrowers Don't Think Trump Will Be So Bad for Their Student Loans

Nearly 40% of student loan borrowers are concerned that Donald Trump’s administration will negatively impact their student loans, according to a new survey from Student Loan Hero. As the country moves into a new era of governance, some graduates are concerned that an already-difficult student debt situation will get worse.

In fact, more than one-fourth (26.6%) of survey respondents admitted they believe a Trump administration will have a “very negative” effect on their student loans. On the other hand, about 40% said they think Trump will have neither a positive nor a negative effect on their student loans, and the remaining respondents (about 20%) said they think he will have a somewhat or very positive effect on their student loans.

These figures come from a poll conducted by Google Consumer Surveys on behalf of Student Loan Hero from Jan. 6 to 9, and the results are based on a nationally representative sample of 1,001 adults with student loans living in the United States.

In the last few years, there’s been quite a lot said about the growing student loan crisis. But what can be done? Student loan borrowers have some idea of policy changes they’d like to see implemented during the Trump administration.

Borrowers Want More Student Loan Forgiveness Options

When asked which student loan changes they would like to see implemented under Trump’s administration, nearly half (44.3%) of respondents chose “federal loan forgiveness after 15 years.” In a speech during his campaign, Trump mentioned something along those lines, proposing a repayment plan in which borrowers pay 12.5% of their income for 15 years, after which any remaining balance would be forgiven. (Whether or not that’s a viable proposal is another matter.)

Currently, student loan borrowers can have their loans forgiven after 20 to 25 years of payments on a federal income-driven repayment plan. There is also a program for federal student loan forgiveness after 10 years in a qualifying public service job (only payments made after Oct. 1, 2007 count). Additionally, borrowers in certain industries can qualify for partial loan forgiveness. However, not everyone qualifies for these forgiveness programs; of those who do, not all will actually have any debt left over by the time the repayment term is up.

It’s not surprising many student loan borrowers expressed interest in a federal loan forgiveness program that discharges student debt after 15 years. According to the survey, 25% of respondents have either stopped making student loan payments or have lowered the amount they put toward repayment in the hope that the government will forgive student loan debt in the future.

Borrowers Also Want Refinancing Options

Student loan borrowers aren’t just asking for forgiveness. Close to one-third of respondents (31.4%) would like to see a program to refinance federal student loans implemented during a Trump administration.

Currently, it’s only possible to refinance through private lenders — the federal government doesn’t offer a refinancing option. The problem is that refinancing federal loans with a private lender means losing access to federal protections such as income-based repayment, deferment, forbearance and some forgiveness programs. Not to mention, borrowers are subject to credit checks and other underwriting criteria that’s at the discretion of each individual lender.

A federal refinancing program could help more borrowers gain access to refinancing options, retain their federal benefits and allow them reduce their interest charges.

How Much Debt Do Student Loan Borrowers Have?

Addressing student loan debt is likely to be on the radar for the incoming administration, especially with nearly $1.4 trillion in student loan debt outstanding.

According to the survey, more than one-third (36.4%) of student loan borrowers have more than $30,000 in debt. Nearly one-fifth (19%) have more than $50,000 in student loan debt. Interestingly, 7.5% of the survey’s respondents aren’t even aware of how much debt they have.

It’s yet to be seen how Trump or Betsy DeVos, his nominee for Secretary of Education, will handle what many consider to be a crisis, but the consensus seems to be that something needs to be done. In response to a request for elaboration on Trump’s student loan repayment proposal, a spokeswoman from his transition team said, “If confirmed, the Secretary designate looks forward to working with the President-elect, the Congress and other stakeholders to address the issues of student debt and repayment.”

No matter who is president, student loan debt can seriously impact your financial situation, including your credit score. (You can see just how much by reviewing the two free credit scores you can get through Credit.com, which are updated every 14 days.) Knowing your options when it comes to student loan repayment and refinancing will be crucial over the next four years and beyond.

Related Articles

This article originally appeared on Credit.com.

Chase Freedom Unlimited or Capital One Quicksilver Cash Rewards: Which Card's Right for You?

If you are looking to pick up a new cash back credit card, you have two choices. You can either get a card that offers different reward values depending on the type of purchases you are making, or you can choose a card that offers a flat rate, no matter what you might be buying. The latter are hassle free and take very little effort on the part of the consumer.

If you are looking to go down the easier path, then two of the best cards available are Chase Freedom Unlimited and Capital One Quicksilver Cash Rewards. Both of these cards will offer the same flat rate on purchases, and both have no annual fee. Where these cards differ slightly is in how you redeem your rewards. In this article, we’ll walk you through the benefits each card has to offer. We’ll also talk a little about the costs and help you determine which card’s right for you.

Comparing the Rewards

The earnings potential is where these cards are very similar. With Chase Freedom Unlimited, you have the ability to earn an unlimited 1.5% cash back on every purchase. You also receive a generous signup bonus of $150 after spending $500 in the first three months. And you receive an additional $25 bonus when you add an authorized user who makes a purchase in the same three-month period.

The Capital One Quicksilver Cash Rewards card also offers 1.5% back on every purchase. There is no limit to the amount of cash back you can earn. Plus, when you sign up for this card, you will receive a $100 bonus after spending $500 in the first three months.

Redeeming Your Rewards

If your sole purpose in having either of these cards is to earn cash back, both will do the job. However, if you would prefer having additional redemption options, then you will enjoy the Chase Freedom Unlimited card. While this is technically a cash back card, you will also have the opportunity to convert your earnings into Ultimate Reward points, with some restrictions. You will then be able to use these points for travel through the Ultimate Rewards portal. If you go this route, your points will be worth 25% more. Alternatively, you can transfer points to one of the many airline or hotel transfer partners.

Now that you’ve heard the good stuff, let’s discuss why to choose either card.

Reasons to Pick the Chase Freedom Unlimited

If you are trying to decide between these two cards, then you are likely to choose the Chase Freedom Unlimited for two reasons. First, you will receive a higher signup bonus, including the ability to earn even more when you add an authorized user. The second reason is that you’ll have the option to convert your cash back into Ultimate Rewards. While earning cash back is nice, knowing you can also use your rewards for travel might be something you’d like.

If you are planning to make a large upcoming purchase, then you might find the introductory APR from the Chase Freedom Unlimited to be a little more useful. You will receive a 0% APR for 15 months on purchases and balance transfers. After that, there’s a variable 15.49% to 24.24% APR. The Capital One Quicksilver Cash Rewards card only offers 0% for the first nine months (and a variable 13.49% to 23.49% APR after).

Reasons to Pick the Capital One Quicksilver Cash Rewards Card

The Capital One Quicksilver is great if you are looking for a plain-and-simple cash back card. This card is perfect for someone who doesn’t want the hassle of transferring points and figuring out whether they’re getting a good value. Plus, it has no foreign transaction fees (Chase Freedom Unlimited has a 3% fee), so this card is ideal for anyone who enjoys traveling outside the U.S.

Remember, before you apply for any credit card, it’s a good idea to know where your finances stand first. You can view two of your credit scores, with updates every 14 days, for free on Credit.com.

Note: It’s important to remember that interest rates, fees and terms for credit cards, loans and other financial products frequently change. As a result, rates, fees and terms for credit cards, loans and other financial products cited in these articles may have changed since the date of publication. Please be sure to verify current rates, fees and terms with credit card issuers, banks or other financial institutions directly.

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This article originally appeared on Credit.com.

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