Philadelphia is rolling out the red carpet in September 2015 in preparation for the Pope’s visit. It’s not only Pope Francis’ first time in Philadelphia but his first official visit to the U.S. While the Pope will also be making stops in Washington, D.C. and New York City, the focus of his visit is the City of Brotherly Love where he will be offering Mass for the conclusion of the World Meeting of Families.
Included in Pope Francis’ agenda is a Saturday Mass at Cathedral Basilica of SS. Peter and Paul (this event is not open to the public). That same day, Pope Francis will also speak at Philly’s Independence Hall about religious freedom and immigration to an estimated crowd of 50,000 where he may greet crowds. The big event, however, will be on Sunday, where Pope Francis will hold Mass on the Benjamin Franklin Parkway. The Mass, which is open to the public, will be held outside the Philadelphia Art Museum and folks are expected to line up all along the mile long avenue.
Estimates for the crowd hoping to take Mass on the Parkway have ranged from thousands to millions. If similar events are any indication, the latter is likely the case: in January, Vatican spokesman Father Federico Lombardi reported that between six and seven million people attended a Mass held by the Pope in Manila. There are approximately the same number of Catholics in the Philippines as in America with 76.7 million people in the U.S. identifying as Catholic in 2014.
Realistically, nobody knows for sure how many visitors to expect. But consider this: a special website selling Southeastern Pennsylvania Transportation Authority (SEPTA) Regional Rail passes for the Pope’s visit was forced to shut down less than two hours after it opened yesterday because of web traffic that was “significantly higher than anticipated.” How much higher? According to SEPTA, “During a 10-minute period after the sales site launched at 9 a.m., we received approximately 900,000 visits, and approximately 1,700 transactions were attempted per second.”
And where are all of these people staying? Not in hotels. Philadelphia boasts just 11,200 hotel rooms in Center City and 35,000 hotel rooms in the region.
That means that visitors hoping to see the Pope are relying on rentals. For months now, those who live in Philadelphia have been offering spots in their homes – at a price – for those traveling to see the Pope. Listings ranging from one room to entire houses abound on Craigslist and other online sites. There’s even a Facebook page advertising rentals: Popedelphia.
For those looking for something a little more official, listings on the popular rental site AirBNB are topping upwards of $4000 per night for a chance to stay near the Parkway. One Rittenhouse apartment is even listed for $6,786 per night although the average listing price, so far, is $733 per night for a spot inside the City. Perhaps not so coincidentally, a new law was just pushed through this summer making AirBNB legal – and taxable – in the City.
All of this adds up to a lot of money changing hands over the next several weeks. While some companies – like AirBNB – make it easy to figure sales taxes on stays, it’s clear that many homeowners are hoping that that the cash-strapped city merely looks the other way when it comes to rentals. But what about the feds?
Money that you receive for the use of real estate – even if it’s your personal residence – is generally taxable to you as rental income. And it’s not only rental payments that might be reportable on your tax return. Income is income. So, you would also include any amounts paid by a prospective renter to cancel the lease; security deposits (to the extent that you retain those; if you return the deposit to the renter, it’s not reportable); advance rents; and expenses (including utilities and the like) paid by the renter. Income is reported in the year it’s received.
For deduction purposes, the same timing rules apply: you report and claim deductions as they are paid. Real estate related deductions would include repairs (but not additions or improvements) and operating expenses. Be aware, however, that you can’t deduct everything related to the stay: deductions related to the rental of your main residence may be limited. You can also claim a depreciation expense for rental real estate but realistically, the depreciation of a property rented for a week or two likely isn’t worth it.
It’s also important to note that getting stiffed may stink but it’s not a taxable event. Cash-basis taxpayers can’t deduct anticipated losses: in other words, if there’s a no show or a non-payer, you cannot deduct those uncollected rents since you haven’t previously included those rents in income (the rules are different for accrual based taxpayers). It’s easy to think of it this way: you can generally only deduct expenses or losses for which you paid money out of pocket.
For the most part, income and expenses related to real estate rentals are reported on federal form 1040, Schedule E (downloads as a pdf). If you are providing additional services for renters, like offering to show your guests the town for a fee, those might be includible somewhere else, likely on a Schedule C (downloads as a pdf) or on line 21 as “other income.”
But. And it’s a big but. Before you start dragging out those green ledger sheets, here’s your mind-blowing “Get Out Of Jail Free” card: if you rent your personal residence for fewer than 15 days, you do not report any of the rental income. It doesn’t matter what the dollars look like. It’s determine by the number of days, not the number of zeros.
That said, be smart: if you are exempt from reporting the income, that means that you do not deduct any expenses as rental expenses. Don’t be greedy.
The opposite is also true. If you rent your home for 15 days or more during the year, you would include all your rental income in your income (it also means that you can claim those expenses). That doesn’t mean 15 consecutive days, it’s an aggregate. So count carefully.
Keep in mind that these are the federal rules. State and local rules do not necessarily follow. You’ll want to read up on rules for permits, licenses and taxes.
Of course, I’m also assuming that you’re planning on a temporary rental of your personal residence. The Pope is only in town for so long. If you’re planning to extend your rental or if the property doesn’t qualify as a personal residence, take note that the rules are very different for second homes and vacation rentals or business rentals. Be sure to check with your tax professional for the scoop on those.