If you rent property for less than 90 days, the new law could affect you!
As of October 1, 2018, a new law imposes Sales Tax and the State Occupancy Fee on charges associated with the rental of “transient accommodations”. The law also authorizes certain municipalities to amend and impose various additional taxes, the tax and rate depends on the municipality.
Definition of “Transient Accommodations” means a room, group of rooms, or other living or sleeping space for the lodging of occupants, including but not limited to residences or buildings used as residences (90 days or less).
This definition includes rentals made through “transient space market places” (such as an Air B&B; VRBO), as well as rentals that are made directly by the homeowner through classified listing sites, local newspaper ads, referrals from friends/family, or placing a sign on the home, etc.
Who is subject to the new law:
- If you are renting accommodations yourself, for a period of less than 90 days.
- If you are using a Marketplace to advertise, where the advertisement contains homeowner’s contact information and the customer pays the homeowner directly.
- You do not meet all the criteria listed below for exemptions.
The following are NOT considered transient accommodations:
- The sale is executed by a real estate broker licensed by the New Jersey Real Estate Commission, the keys or other means of physical entrance to the property are provided to the lessee at the location of the offsite real estate broker, the rental property is private residential property, and the lessor does not provide common hotel services such as maid service, room service, or linen changing service.
- The occupancy occurs for at least 90 consecutive days (permanent resident exemption).
- The occupant is an entity that has been granted exempt status by the Division and has been issued an Exempt Organization Certificate (Form ST-5).
If you are using the type of transient Marketplace online service such as Air B&B or VRBO, where the Marketplace is collecting the rental fee, then they are also required to collect all applicable taxes from the customer and remit them to the Division of Taxation. In that case you are not required to register separately.
More detailed information, can be obtained from the NJ Department of Taxation website:
If you owe back taxes to NJ from the period of February 1, 2009 until September 1, 2017 a New Amnesty program has been implemented by Governor Murphy.
The amnesty program begins November 15th, 2018 and ends on January 15th, 2019.
During this period, taxpayers have the opportunity to file past due tax returns and/or pay back taxes with half the interest and NO penalties.
If you do not take advantage of the program, NJ will add an additional penalty of 5% non-abatable if the debts are not resolved.
We strongly urge you to take advantage of the opportunity to resolve past due taxes and liabilities during the Amnesty period.
Visit the New Jersey Tax Amnesty Website to Review Eligibility Requirements
Who runs the greatest risk of being audited?
Uber Rich – 1 of 3, 34.69%, reporting over $10 million were audited in 2015.
Millionaires – 1 of 10, 9.55%, reporting over $1 million.
Incomes of > $200,000 – 1 of 38, 2.61%.
Sole proprietors – 1 of 50, 2-2.5%.
Earned Income Tax Credit – 1 of 57, 1.75%.
Large charitable write-offs
Business meals and entertainment
100% business use of a vehicle
Large losses on Sch C on an activity that looks like a hobby
Day trading losses on Sch C
Deducting rental losses
Failing to report overseas bank accounts
Effective 1/1/2017, the New Jersey Sales and Use tax rate will go from 7% to 6.875%.
Please be sure to make the necessary changes.
The new rate will remain in effect until December 31, 2017.
The tax rate is scheduled to decrease on January 1, 2018 to 6.625%.
The IRS is getting tough on mileage records.
Accordingly to Kiplinger’s June 17, 2016 Tax Letter:
“A taxpayer used his personal auto in his business of marketing petroleum properties. For some activities, he kept a meticulous log with the exact miles driven, destination and purpose. For other trips, he wasn’t so precise, either estimating his mileage or failing to list the place he drove to. The Tax Court approved the business miles for which he had detailed records and nixed the rest.”
(Powell, TC Memo 2016-111)
A Few 2016 Year End Reminders that need to be done by December 31st
- Check your flexible spending account balances, you are allowed to carry forward up to $500 into the following year.
- Write checks for deductible items.
- Maximize your Simple Plan contributions – $12,000, $14,500 if 50 and older, or
Reminder to those earning over $200,000 single, $250,000 jointly
The new Medicare Tax Act adds additional taxes of:
- .9% on earned income
- 3.8% on investment income.