Need to Know: New Lodging Tax Begins on July 1

Need to Know: New Lodging Tax Begins on July 1

Beginning July 1, 2021, owners of certain short-term rentals must begin paying hotel taxes under House Bill 317, which was signed into law by Governor Kemp last month. The law requires that home rental companies, such as Airbnb and VRBO, collect Georgia’s $5-per-night lodging tax as well as local excise taxes.

House Bill 317 imposes the $5 fee on all lodging facilities and rooms except those that do not provide shelter and extended-stay rentals (30+ days). The costs will be passed on to renters in their bills.

Lodging Tax Expanded

In short, House Bill 317 revised the state definition of “innkeeper” (used to calculate lodging excise taxes) to include Airbnb and other marketplace-based innkeepers. It adds a $5 nightly tax to short term rentals in addition to the sales tax, and Fannin County and City of Blue Ridge lodging taxes already levied. The county’s tax rate is currently 6%, while rentals within the city limits pay 8%.

Total lodging taxes for all local rentals are now:

  • 7% Sales Tax
  • 6% Fannin County Lodging Tax
  • 2% City of Blue Ridge Lodging Tax (if applicable)
  • $5-per-night Hotel Tax

More Money for Local Spending

The lodging tax is projected to raise $17 million for the state in 2022, while local governments could receive $20 to $30 million annually. In Fannin County, the hotel/motel tax is split 50/50 with the Chamber of Commerce, with the county funds spent mostly on public safety projects. The Chamber’s 50% is spent on marketing and tourism, which helped generate $273.3 million in direct visitor spending in 2020, including $65.6 million in lodging.

If you need assistance computing or filing lodging and excise taxes, please contact us at (706) 632-7850. We can help you update your systems for the new tax rates. 

Where’s My Refund?

Still waiting on your federal or state tax refund? You can start checking your federal refund status within 24 hours after an e-filed return is received by using the Where’s My Refund? tool on the IRS website. The tool provides a personalized refund date after the return is processed and a refund is approved.

The IRS updates the Where’s My Refund? tool once a day, usually overnight, so you don’t need to check the status more often. You will need to allow time for your financial institution to post the refund to your account or for it to be delivered by mail.

To Use the Tool, You Will Need:

  • Your Social Security number or Individual Taxpayer Identification number
  • Your tax filing status
  • The exact amount of the refund claimed on your tax return

Where’s My Refund? Links:

Reporting Tip Income

Generally, income you receive from any source, such as tips, is taxable. This includes:

  • Tips directly from customers.
  • Tips added using credit cards.
  • Tips from a tip-splitting arrangement with other employees.
  • Non-cash tips, such as tickets, passes or other items of value.

If you receive $20 or more in tips in any one month, you must report your tips for that month to your employer by the 10th day of the next month. Your employer must withhold federal income, Social Security and Medicare taxes on your reported tips.

Is Your “Side Hustle” a Hobby or a Business?

Is Your “Side Hustle” a Hobby or a Business?

With a little extra time at home on your hands this year, you may have taken up a new hobby — maybe selling photographs, creating skin-care products or trading antiques — whether for fun or to make a few extra bucks. But is it just a hobby? Maybe you’re thinking it could turn into a new business venture. What’s the difference? And how does it affect your taxes?

The general thinking is that a business is operated to make a profit. A hobby, on the other hand, is engaged in for sport or recreation — it’s not intended to make a profit.

Whatever you consider your “side hustle” to be, keep in mind that you must report income earned on your annual federal tax return. How it’s reported depends on whether it’s a business or a hobby.

Differentiating Between a Hobby and a Business

The IRS usually considers your activity a business if you’ve made a profit for three of the past five years. Otherwise, you have to establish a profit motive. Consider how you would answer the following questions to help determine whether your hobby is really a business:

  • Is the activity carried out in a businesslike manner, where you maintain complete and accurate books and records?
  • Does the time and effort you put into the activity show that you intend to make it profitable?
  • Do you depend on income from the activity?
  • Are any losses due to circumstances beyond your control — or are they normal for the startup phase of your business?
  • Have you change your methods of operation to improve profitability?
  • Do you have the knowledge needed to carry out the activity as a successful business?
  • Were you successful in making a profit from similar activities in the past?
  • Do you expect to make a future profit from the appreciation of any assets used in the activity?

Tax Consequences of Hobbies vs. Businesses

If you make money from a hobby, you must report that income on your tax return (Schedule 1, Form 1040). The income will not be subject to self-employment tax. However, because of tax law changes made via the Tax Cuts and Jobs Act, you cannot deduct expenses for that hobby. Previously, you may have been able to add them to your miscellaneous itemized deductions, but these can no longer be deducted.

If your activity is considered a business, however, you will report your income on Schedule C. And you’ll pay self-employment tax on your earnings. However, you will also be able to deduct your expenses, including any qualifying home office expenses. These deductions can help reduce the amount of tax due on any income you made.

The rules regarding income and expenses for hobbies and businesses can be confusing. If you’re not sure the best way to handle your new “side hustle,” contact us. We’ll be happy to help you sort out the specifics of your situation.

Lodging Tax Increase Coming

If you’re a cabin rental owner, please note that BOTH Fannin County AND City of Blue Ridge Lodging Tax Rates are going up!

The county’s tax rate will rise from 5% to 6% beginning January 1, 2021. For rentals within the city limits, the City of Blue Ridge’s Hotel/Motel Excise Tax will increase from 5% to 8%, effective November 1, 2020.

This is in addition to the 7% that goes to the State of Georgia.

Let us know if you need help updating your systems for the new tax rates. We’ll be glad to help you with the process.

MONEY BRIEF #1

If you filed your 2019 return by this year’s extended July 15 deadline and either received a refund in the past three months or will receive a refund, you may also receive an interest payment from the IRS. The IRS is sending interest payments — averaging about $18 each — to about 13.9 million individual taxpayers who are receiving refunds. If you received your refund by direct deposit, you will also receive your interest payment by direct deposit. Otherwise, you will receive a check. Note that any interest payment you receive from the IRS of $10 or more is taxable — you will receive a Form 1099-INT and must report it on your 2020 federal income tax return you file in 2021.

MONEY BRIEF #2

Did you know unemployment compensation is taxable? Any UI benefits you receive this year will be considered taxable on your 2020 tax return next spring. This is especially important to keep in mind if you chose not to have tax withheld from your benefits when you applied. Taxable benefits include regular UI plus any additional unemployment compensation authorized under the Coronavirus Aid, Relief and Economic Security (CARES) Act. If you did not choose withholding, or if the amount withheld is not enough, you can make quarterly estimated tax payments instead. Payment for the first two quarters of 2020 was due on July 15. Third and fourth quarter payments are due on September 15, 2020, and January 15, 2021, respectively. If you’re unsure of your situation, contact us today and we’ll help you work it out.