Rental during certain hours of the day

USA Discussion in 'General Tax Discussion' started by newacct, Feb 4, 2019.

  1. newacct

    newacct

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    If someone rents a part of their home to a daycare (run by an S Corporation of which the homeowner is a shareholder, if it matters) during school hours only, and the person has use of the whole home during non-school hours, should the days of the rental be counted as "Personal Use Days" (since the person has use of the rented space during some part of every day) or "Fair Rental Days" (since it is rented at a fair rate) on Schedule E?
     
    newacct, Feb 4, 2019
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  2. newacct

    kirby VIP Member

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    IRS Publication 587 talks specifically about daycare use of home. Be sure to read the latest publication as the tax laws are changing.
     
    kirby, Feb 6, 2019
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  3. newacct

    newacct

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    Thanks for answering. I'm not asking about home business expenses (Form 8829 / Publication 587), which I don't think I can claim if I am considered an employee of the business anyway. I am asking about how to fill out the "Fair Rental Days" vs. "Personal Use Days" for rental income (1040 Schedule E / Publication 527), and I can't find anything in that that talks about a situation like renting part of the day to a daycare.
     
    newacct, Feb 8, 2019
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  4. newacct

    ttreacy

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    newacct,

    Fair Rental Days are the # of days your house was "rented out" & Personal Use Days are the number of days the space was used for "personal use". For more details, read "Line 2" the Schedule E instructions found on the IRS website - that should give you the information you're looking for. "Line 2" should be found on page E-5 to E-6 of the instructions. Hope this helps.
     
    ttreacy, Feb 8, 2019
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  5. newacct

    newacct

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    I have read that, but that's where my confusion is, because in the case of renting to a daycare, the rental is only during some part of the day (school hours during school days), and for every day it was rented out, the owner has the space for "personal use" during some part of the day (non-school hours). So would every day be a "Personal Use Day"?
     
    newacct, Feb 8, 2019
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  6. newacct

    ttreacy

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    Below is Quoted from Pub 527 under Chapter 5 (Personal use of a dwelling unit...

    "If a dwelling unit is used for personal purpo-ses on a day it is rented at a fair rental price (discussed earlier), don’t count that day as a day of rental use in applying (2) above. Instead, count it as a day of personal use in applying both (1) and (2) above."

    By reading the above - It looks like everyday would be a "Personal Use Day" if you use the room for personal use after daycare ends.

    Differentiating between Fair Rental Days and Personal Use days come into play when figuring out what expenses can be deducted. So in your case , no expenses will be allowable since you use the space for personal use everyday after daycare ends.

    Hope this helps.
     
    ttreacy, Feb 8, 2019
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