New Bern, Morehead City, and Beaufort Tax Attorney
North Carolina State House Passes Tax Law Bill
On this past Wednesday, May 21, 2014, the North Carolina State House passed House Bill 1050 by a vote of 84-29. The Bill clarified some provisions of Session Law 2013-316, which overhauled the North Carolina Tax Statutes. One item of particular interest for our coastal community is a provision that makes clear private residences and cottages rented for fewer than fifteen (15) days listed with a real estate broker or agent are subject to sales and occupancy taxes. This is a departure from a June 14, 2012 memorandum from the North Carolina Department of Revenue which provided that the gross receipts derived from the rental of all private residences and cottages for fewer than fifteen (15) days in a calendar year were not subject to sales tax, no matter if such were listed with a real estate agent or broker for rental to other persons. While this provision was specifically included in the Bill in anticipation of the United States Open golf championships being held in Pinehurst, North Carolina during the month of June, it will nevertheless impact the entire state, especially popular vacation destinations across coastal North Carolina.
It should be noted that the Bill does not change the income tax laws with respect to personal residences. A primary residence or second home can be rented to a third party for up to two weeks (14 nights) each year without that income begin reported to the IRS or North Carolina. Furthermore, the house is still considered a personal residence, so you can deduct the mortgage interest and property taxes under the standard primary residence and second home rules.
The North Carolina State Senate will now consider the Bill, but legislative analysts predict the Bill will likely pass in its current form.
If you have any questions regarding House Bill 1050 or any other tax issue, please contact Andrew G. Foster at Harvell and Collins, P.A