Taxes on a second Home

For Your Clients: Can I Deduct Taxes on Second House?


By Claudia Buck



RISMEDIA, August 31, 2010--(MCT)--Do I pay taxes for household workers? Can I take a deduction for a second home used by family? The IRS' Jesse Weller and the California Franchise Tax Board's Brenda Voet tackle those questions from readers.



QUESTION: I bought a house a mile from my primary residence with the specific intent of renting it in the future to my daughter. If my daughter lives in the house this year and pays the utilities in her name (but pays no rent), does the house still qualify as a second residence?



ANSWER: Yes, you are considered to have personally used the second property all year because your daughter used it as her primary residence. Accordingly, you may deduct the entire amount of the property tax and mortgage interest as itemized deductions.



Q: If I hire people to work in my yard or do housekeeping, is there a limit to the amount I can pay them without having to fill out 1099s like an employer does? And if there is a limit, does it only apply for one person, or can I hire another for the same limit for a different type of work?



A: When a taxpayer hires people to work in and around his/her personal household — such as housekeepers, baby sitters, gardeners and yard workers — those workers may be considered employees.



Although you usually do not need to complete a Form 1099 for paid work that is performed in and around your home, you may need to issue a Form W-2, Wage and Tax Statement. You also may be responsible for withholding and paying employment taxes on wages paid to workers who qualify as your employees.



Usually a household worker is considered an employee if the payer can control both what work is done and how it is done. If the worker controls how the work is done, the worker is normally considered self-employed and not an employee.



For example, (individuals) who work in your home like carpenters, builders and plumbers are normally self-employed, independent contractors and are not employees. Self-employed workers usually provide their own tools and offer their services to the general public.



To answer your question about the payment threshold: If you pay an individual household employee cash wages (including wages paid by check or money order) of more than $1,700 in 2010, you generally must withhold Social Security and Medicare taxes from all cash wages.



You have the option to pay your employee's share of taxes from your own funds rather than withhold it from their salary. You are not required to withhold federal income tax from wages you pay to a household employee, unless your employee asks you to withhold income tax and you agree. In some situations, you also may be responsible to pay federal unemployment taxes on a portion of the cash wages.



If you must withhold and pay Social Security and Medicare taxes, or if you withhold federal income tax, you will need to file a Form W-2 for each employee after the end of the year. In that situation you will also need to file a Schedule H, Household Employment Taxes, after the end of the year with your Form 1040 individual income tax return.

Oh Hell No!

As everyone knows, I have issues with Philadelphia. Here is something to add to the list.

Philly requiring bloggers to pay $300 for a business license

Moonlighting

If you google Commercial Mortgages, you get a lot of stories, a lot of them bad.

I have heard chatter that it is so very difficult to get a commercial mortgage that I know of one broker who is moonlighting in another industry.

Further signs point to an L shaped recovery.

Yes, it sucks but at least we know what we are dealing with right now. More importantly it indicates where everything stands.

The one thing that stands is Cash is King. If you have enough paper, you have more leverage than most people and have more flexibility. People in that position who are real estate centric are right now looking and taking notes. Recoveries do not happen over night, so they have the luxury of waiting to see what is available at their price point.

The upcoming winter will be quite a show.

To Be The Shepard

When someone commits a social transgression against you. It hurts. It is especially painful when you made the effort to follow societal norms while that person has decided to ignore them. That pain releases in your head a cacophonous set of emotions which include rage and frustration. You feel like kicking ass and taking names. And of course if you are a normal person, which most of us are, you hold back and try to let it go. Until the next time it happens again.

Perhaps it is a sign of old age, but I find this cycle tiring and unnecessary. I desire now to get beyond that. And some recent news has come to my attention that reinforces that position.


It recently came to my attention that a former noisy and obnoxious neighbor recently sold his home and the evidence indicates that he had to engage in a short sale. He either could not hold onto it or the rapid deprecating value of his home was driving him nuts. Or it was a little bit from column A and column B.

A while back, I wrote about the awful tragedy of Annie Le and compared her murderer to an entitled miscreant that used to bully me in high school. It recently came to my attention he has the proud distinction of owning a home in an area where the housing market's prospects of recovery are between zero and negative 10. Due to this and many other factors effecting his finances, it is highly unlikely that we will ever cross paths again which is fine by me.

As much as I want to be the harbinger of justice, I realize that in certain situations it is not my place. Something else is in play that will deal with these cretins. It is also a strong reminder to myself that what has befallen these individuals can take me down too. Especially if I stray from my path.

Which is why any personal satisfaction has dissipated and replaced with a strong sense of humility and compassion.

Besides, life is very short. So why should I waste it on people who really don't matter to me? Why should give into tyranny when I can try for something so much better?

One should always stand up for themselves. But be aware when it is time to walk away and let nature take it's course. And have the fortitude to let go.

I mentioned the following quote in a previous entry. And I think it is more than appropriate to conclude this entry with it.

In the long run, every man will pay the penalty for this own misdeeds. The man who remembers this will be angry with no one, indignant with no one, revile no one, blame no one, offend no one, and hate no one.

-- Epictetus

New Home Sales in New Bern

New home sales in the New Bern area have been steady as compared to 2009. Through 8-20-2010 there have been 202 new home sales. There are currently 305 new homes listed in the MLS although some of these are proposed construction. Of these only 13 percent are over $200,000. All this equates to a 10-11 month inventory of new homes. The defination of a buyers market is over 6 months of homes for sale.

For the same time frame in 2009 there were 204 new home sales. At first glance it looks like sales this year are about the same as last. However, some builders are giving deep discounts to buyers. This is not healthy for anyone in the long run as it will hurt everyone's appraisals.

For those of you who are drunk

If this does not sober you up.





I have no idea what will.

Heat

It is going to get hot.


Scarsdale has been in the news recently and not for the best of reasons. The link below will give you the rundown.

Honky Trek: Scarsdale?

The biggest development for Scarsdale is the Affordable Housing Plan. Recently there have been new developments for this plan.

Housing Implementation Plan Update


Housing Settlement

According to the August 13, 2010 Scarsdale Inquirer, Bill Ryan, who represents Scarsdale on the Board of Legislators "was disappointed" that the legislators were put out of the loop. In his opinion, the County Executive Office has locked them out and is dealing with the federal government directly.

It is understandable why the County Executive Office is maintaining a tight rein on this issue and making sure there are no nut huggers dragging them down. This is an extremely volatile issue that needs to be handled with kid gloves. The last they want is any more attention upon themselves, especially from the Federal Government.

There is one bit of information that has been brought to my attention which is at best a rumor but can't be ignored.

There is talk there is certain factions creating a work around for affordable housing in Westchester that satisfies the requirements and respects the sensibilities of the communities involved. The workaround is to build affordable housing in Somers.

IF YOU'RE THINKING OF LIVING IN: SOMERS

Somers is not a Scarsdale. Which makes Somers more flexible and in certain minds more appropriate for affordable housing.

A major barrier to entry for this to occur is that there is no direct Metro North Service to Somers. If you want to commute to Somers from Manhattan, you need to either go to Katonah or Goldens Bridge.

Apparently Somers resistance towards an MTA line is due to this rumored plan to consolidate affordable housing in that town.

Whether it is true or not, none of this is going to end well. And those seven years are going to go very fast.