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Form 8825 CPA discusses Personal Use Days | Rental Property 2013

Form 8825 CPA Wilmington NC

Gary Bode, CPA: there’s lot of resources to answer Form 8825 issues. For a free phone consult call (910) 399-2705.

Form 8825 uses the number of Personal Use Days to calculate the percentage of rental property expenses that are deductible. The personal use portion of real estate taxes and mortgage interest then flows to the Partner, Member or Shareholder’s personal Form 1040 via Schedule K-1.

Personal Use Days issues on Form 8825 include:

  • What’s a day? Usually an overnight accommodation counts as a day.
  • Did you rent to a relative? If a Member, Partner or Shareholder had free access during that rental, it’s a personal use day even if you collected fair rent.
  • Did you house swap? This popular technique counts as personal use days even if you collected fair rent.
  • Did you rent at less than Fair Market Value? If so, these are personal use days. The rent received counts as income but the expenses don’t qualify as deductions. One trick here is to figure out what Fair Market Value is for your property. Ask your Form 8825 CPA to help.

Where can you find more information about Form 8825’s Personal Use Days?

As a Form 8825 CPA, I’ve used the following resources:

  • Sec. 280A(d)(2). Never hurts to go to the source.
  • IRS Audit Technique Guides. The IRS publishes how they will audit you if you’re audited. I think most Form 8825 CPAs read these to help bullet proof your return.
  • IRS Tax Topics: online at IRS.gov. For example, Tax Topic 415 Renting Residential and Vacation Property. Pretty basic information.
  • IRS Publication 527, Residential Rental Property. Gives some nice examples.
  • Form 8825 instructions.
  • Tax Research Software. Your local University problem subscribes to a tax law database. Tax Court cases help define your audit risk in gray areas.

So why would you need a Form 8825 CPA?

  • Well, you may not. I’m sure many folks self-prepare these returns.
  • You might have a Form 8825 CPA prepare the initial return so you can use it as a template for future returns.
  • Personal Use Days are only one issue on Form 8825. Depreciation, passive activity loss, etc. can be daunting as well. Plus the new depreciation rules for 2014, and the unique tax positioning opportunities for 2013.
  • Maybe your circumstances changed during the tax year.
  • Maybe you’re unclear on new tax laws.
  • Maybe there are non-Form 8825 issues in the “parent” tax return of Form 1120-S or Form 1065.
  • In general, I think most CPA fees are recouped in tax savings.
  • Professional preparation offers peace of mind. Your Form 8825 CPA knows the red flags. If present, he/she explains them to the IRS through supplemental documentation.
  • Maybe your circumstances aren’t standard. Personal Use Days might fall in this category.

Ask your Form 8825 CPA about the unique tax positioning opportunities for 2013 published in December 1012. And it never hurts to be proactive; understand the new depreciation rules for 2014.

I’m a rental property CPA with a virtual office who prepares Form 8825 and Schedule E. The virtual office allows me to serve you even if you’re not close to my physical offices in Wilmington NC. My extended family owns rental property, so I stay current on emerging issues on Form 8825. There are dozens of posts on this website about Form 8825, Schedule E, rental property red flags, passive losses, etc. For a free phone consult call (910) 399-2705.

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1 comment to Form 8825 CPA discusses Personal Use Days | Rental Property 2013

  • Robert Lawrence

    I have 2 questions:

    1. Real estate is owned by a 2 member LLC treated as a partnership for tax purposes. I assume that the members’ personal use of the property are personal use days. And are these aggregated so that once there is a total in excess of 14 between the two of them this makes the property a dwelling unit used as a home?

    2. When there is rental and personal use of the property by the members(partners) where is the personal use component of mortgage interest and real estate taxes reported to them? Does it show up on Schedule K-1 line 13? And where do they report this on their personal returns? Just on schedule A?

    Thank you.

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