It is so easy to make a little money now
Rent a room on Airbnb. Lead someone around town by Uber and Lyft. Sale of used books and DVDs on Amazon, or a piano on eBay ™. Tweet this
It's all good. - Until you get a tax bill that you did not expect
Then you get a 1099-MISC or 1099- K form in the mail, and it dawns on you that IRS expects to see this income in your tax return.
chances are, if you do a bit of money in the sharing economy, the effect on your taxes will be minimal
your most profitable activities were, the more impact they can have on your tax return
This is how certain types of income affect your taxes: ..
renting your home (or part of your home) for 14 days or less per year
If you want to rent your house for cash from time to time, and you do not want not be bothered with record keeping, make sure not to rent your home more than 14 days a year.
assuming you live in the house most days yourself, you can rent your house for a few days here and there and not even report the income on your tax return.
you can always take your mortgage interest and property tax deductions if you itemize.
You can not deduct expenses related to rent, such as cleaning supplies and toiletries, but it is much wiser taxes.
location of your home for more than 14 days
If you rent your residence more than 14 days, and you live in the house more than the more than 14 days, or 10% of the number of days you rent the house, you will use Appendix E to report income and rental expenses on your tax return.
your mortgage interest and property tax deductions will be allocated between your leasing business and your home.
You can also deduct expenses related to the rental of the house.
However, you can not deduct more expenses total rent you receive in gross rental income for the home you live in also.
providing services, such as using your car as a taxi
If you have signed up to provide a service and get paid for it, congratulations! You have joined the ranks of self-employed, and by default, are generally regarded as a sole proprietor.
This means that you must declare your income for tax purposes.
Make sure to set aside some of the money you receive for taxes and self-employment taxes, or you could be in a time of tax shock coming. Tweet this
If you're in the tax bracket of 25%, for example, and you pay 15.3% self-employment tax, which is approximately 40% of your income after expenses you need to set aside to pay taxes.
Selling things on Amazon, eBay ™, or any other online service
If you sell household items, books you've read, and other things online you probably will not see any effect on your tax return.
personal items generally sell for less than we paid for them again, so there is no profit. You can not take a loss on personal items.
However, if you turn your basement into a warehouse and start really profiteering, you may have to report income to the IRS.
Reporting income depends on the type of item and how long you held.
long-term gain
For example, say you bought an antique hutch at a garage sale for $ 100. Two years later, you sell online for $ 0. You generally have a long-term capital gain of $ 100 ($ 0 - $ 100 = $ 100).
You declare capital gains on Schedule D and pay favorable rates capital gains on your long-term benefit
short term gain
If you held the antique hutch for one year or less, you still have a capital gain.
However, there is a short-term gain, so you pay taxes at the same rate you would pay on your other income (but not self-employment tax).
full business
If you get really busy and set up an online sales business, you can be a sole proprietor. In this case, you declare the income and expenditure in Annex C.
You'll have to pay income tax and tax on self-employment income. The good news is that, as a person self-employed, you can deduct more expenses from your income, too.
How do I know what the income is reported to the IRS?
If you receive a 1099 form from someone you are dealing with, the IRS also received the same information.
This includes Form 1099-MISC for miscellaneous revenue and 1099-K for income paid by financial institutions (credit and payment debit card) and the income earned through services online.
the IRS is very effective to match the income taxpayer identification numbers, so make sure that all income reported to you appears on your tax return or attach an explanation why it should not.
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