Ed note: Anything that seems too good to be true, probably is, right? Well, maybe. Can you make extra money off of an extra bedroom or a seldom-used car? Sure. Will the IRS take some of that profit? Maybe. Here’s the breakdown of what to expect if you participate in the sharing economy.
The rise of the Internet and social media has also created new opportunities for individuals to make some extra cash: the sharing economy. Simply put the sharing economy is the offering up of an unused resource for sale or rent, such as an empty bedroom, a parked car or a skill. It may seem minor, but according to one estimate the sharing economy represents a 110 billion dollar market.
Airbnb is a community marketplace for people to list, discover and book lodging around the world through mobile phones or the internet. Airbnb has over 500,000 listings in 33,000 cities and 192 countries.
That extra income you take in from offering up your main home on the website may be taxable depending upon the extent you rent out the property during the year.
Scenario 1: You use the house as your home and rent it out less than 15 days per year.
Result: A taxpayer who rents the property less than 15 days per year does not report the rental income or expenses on his or her return at all. This allows a person to rent out his or her home for a short period of time with no tax consequences. Additionally, to meet this exception you must use the home for your own personal purposes more than the greater of 14 days or 10% of the total days it is rented to others at a fair rental price.
Scenario 2: You use the house for personal purposes – but not as a home – and rent it out more than 15 days per year.
Result: The rental income and expenses must be reported on your tax return. All the home expenses must be divided between personal and rental use.
Also, if you provide significant services to your renters in the form of cleaning, meals, etc., the IRS will treat the activity as being more akin to a hotel, rather than a mere rental activity, and the net income will be subject to self-employment tax on Schedule C of your Form 1040.
It should be noted that Airbnb may not be permissible in your city. This is because most municipal governments have ordinances that ban short term rentals such as the ones frequently offered on Airbnb. These laws are designed to protect a city’s housing supply particularly for low to middle income people. Additionally, you may be responsible for sales tax and or a hotel or occupancy tax on your rental income. Check with a local property expert in your area before listing that spare bedroom, or renting your house out while you are on vacation.
RelayRides and Getaround
If you have an old jalopy sitting in front of your house that is gathering more dust than miles, then sites like RelayRides or Getaround may be just for you. These services allow car owners to rent their vehicle to others for short periods of time.
How this income is reported on your tax return will most likely depend upon the frequency that you rent the vehicle out.
Scenario 1: You only occasionally rent your vehicle out.
Result: The income will probably only be subject the ordinary income taxes.
Scenario 2: You regularly rent your vehicle out to the degree that it has become your personal business.
Result: The income will be reported on your Schedule C of your Form 1040, thus making it subject to both the ordinary income tax and the self-employment tax.
Prosper and LendingClub
If you don’t have an extra bedroom or a car to share, but do have some extra cash sitting idly in a bank account, then peer-to-peer lending via sites like Prosper or LendingClub may offer you an opportunity to make some extra money. These websites allow individuals to lend or borrow money with a degree of anonymity with interest rates based upon credit scores and levels of risk. Both websites let investors to lend money in as low as $25 increments.
This type of income is referred to by the IRS as original issue discount, or OID. Essentially this occurs where a debt is issued at less than the stated redemption price (i.e., a discount), that difference is your income. Simply, put OID functions in a similar matter to interest income and the IRS taxes it the same way on Schedule B of Form 1040.
While the “sharing economy” presents new – and often easy – ways to make cash, it also brings about tax implications that you should prepare for.
Ed note: We all have moments when we feel different or left out. For those who learned another language before English, their differences may be more obvious, and they can feel singled out. But, as Tracy López points out, the benefits of bilingualism are many. You may want to add another language to your repertoire too! Leer en español.
When teased by Johnny Carson about his accent on a Tonight Show appearance, Argentine-born actor Fernando Lamas responded, “When a person has an accent, it means they can speak one more language than you.”
That quote has always fascinated me with its cleverness, because it’s true. If you speak English as a second language in the United States, you may have faced discrimination or ridicule because of your accent. However, chances are, that native English-speaker is monolingual, and the fact that you speak two languages means you have more opportunities and advantages. Who’s laughing now?
The benefits of being bilingual affect every area of your life. Don’t believe me? Check out a few benefits of being bilingual:
- Speaking two languages means you can speak with monolingual people of both languages – increasing your network of friends and possible romantic partners.
- In today’s global economy, being bilingual means you can earn more money than monolingual co-workers for the same job, and it makes you more appealing to employers. Bilinguals are needed in all industries – from teachers, translators, and writers, to managers, bankers, and television personalities.
- According to scientific studies, being bilingual has real cognitive benefits. You’re more likely to be better at multitasking, more creative in problem solving and less likely to develop Alzheimer’s at a young age.
- Let’s not forget the entertainment benefits! Being bilingual means you have twice the books, magazines, movies, TV shows, websites and music to enjoy.
So, are you convinced there are many benefits to being bilingual? If you’re monolingual and reading this, you may be wondering how you can learn another language to enjoy the benefits of bilingualism too. Here are 10 tips to get started.
- Choose one language. It can be tempting to study more than one, but for most individuals, this approach will slow your progress and keep you from becoming proficient in any one language.
- If possible, choose a language spoken by the immigrant population where you live, or a language a friend or family member speaks so you increase your opportunities to practice with native speakers.
- Immersion is one of the best ways to learn a language. Every chance you get, you should listen to, speak, read and write the language.
- Practice. The more you use the language, the better you’ll become. If you don’t use it, you’re likely to lose almost everything you worked so hard to learn. Be consistent!
- Make use of local classes. Most cities have ESL classes and most community recreation centers hold free or low cost language courses.
- Use the buddy system. Find a friend who wants to learn the language and be accountable by checking in on each other’s progress each week.
- Take advantage of free online resources. DuoLingo.com is my personal favorite. You can download the app and then sign up to receive a daily email reminder to practice.
- Keep it fun. Integrate the language into your favorite activities. Do you love to dance? Start listening to music with lyrics in the language you’re learning. After listening to a song a few times, you start to pick up enough words to sing along here and there!
- Plan a dream trip to a country where the language you’re learning is spoken. Let yourself get excited, plan an itinerary and envision yourself using the language when you visit. Now you have something big (and motivating!) to look forward to!
- Don’t be shy. Fear of making mistakes in your new language causes performance anxiety. Accept that you’ll make mistakes, be misunderstood and may even say things that cause native speakers to laugh at you. Just keep trying.
If you’re not in one of the few states without a sales tax (we’re looking at you: Alaska, Delaware, Montana, New Hampshire and Oregon), then we have news you might be interested in. In the coming weeks, 16 states will suspend their regular sales tax on certain items. Use this interactive graphic below to check out when your sales tax-free weekend might be and what you can save on. With a little planning, you can save a lot on all that back-to-school shopping!
On a mobile device? Click here to view graphic.
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