Tax Refunds Available for Renting Your Vacation Home, Adopting a Child

The Internal Revenue Service has provided some tax tips for borough residents who are renting their vacation homes this summer as well as pointers for couples who have adopted a child within the past year.

Renting Your Vacation Home

Income received for the rental of a vacation home must be reported on a federal income tax return. But those who rent the property for only a short period of time each year may not be required to report the rental income.

Those who use a vacation home as a residence, but also rent it others, must divide the expenses between rental and personal use. The rental portion of the expenses in excess of the rental income cannot be deducted.

A homeowner is considered to use the property as a residence if they inhabit it more than 14 days – or more than 10 percent - of the total days it is rented to others.

If a homeowner uses a vacation home as a residence and rent it for less than 15 days per year, they do not have to report any of the rental income.

For more information, visit the IRS’s website and view IRS Publication 527, Residential Rental Property.

Expanded Adoption Tax Credit

Queens residents who adopted a child last year and requested an extension of time to file 2011 taxes may be able to claim the expanded adoption credit on their federal tax returns.

The Affordable Care Act has temporarily increased the amount of the credit and made it refundable, which means it can increase the amount of a taxpayer’s refund.

Here’s what you should know about the credit.

1. The credit for tax year 2011 can be as much as $13,360 for each effort to adopt an eligible child. Those who adopted or attempted to adopt a child in 2010 or 2011 and paid qualified expenses relating to the adoption could qualify.

2. A person who attempted to adopt a child could still claim the credit even if the adoption did not become final.

3. The credit for qualified adoption expenses is subject to income limitations and may be reduced or eliminated depending on a taxpayer’s income.

4. Adoption expenses must directly relate to the legal adoption of a child under the age of 18 years. They may include adoption fees, court costs, attorney fees and travel expenses.

5. To claim the credit, one must file a paper tax return and Form 8839 (Qualified Adoption Expenses) and attach supporting documents – such as a final adoption decree, placement agreement from an authorized agency or court documents - to the return.

6. Those who filed a tax return for 2010 or 2011 but did not claim an adoption credit can file an amended return for a refund. Use forms 1040X (Amended U.S. Individual Income Tax Return) and 8839 and attach supporting documents.

7. The expanded credit provisions available for 2010 and 2011 do not apply in later years. In 2012, the credit drops to $12,650 per child and the credit is no longer refundable.

For more information, visit the Adoption Benefits FAQ page on the IRS’s site.