Can Rental Income Be Tax-Free? | Kaiser Tax

Can Rental Income Be Tax-Free?

Recently, we got a call from one of our clients who owns a downtown condominium. He wanted to rent his condo during Super Bowl Week and make some easy money. My client hoped to rent his condo for $1,250 per night for a week for a total $8,750 of rental income.
 
Of course, our client was wondering about the tax consequences of doing so and if renting his condo was worth the effort after the IRS came calling. I was happy—delighted, actually—to inform my client that this rental income would be tax-free.

Our client was stunned. He asked his question again and wondered if we understood what he was asking. We did, and then went on to explain that under Internal Revenue Code 280(a), a taxpayer can rent out a dwelling for 14 days or fewer every tax year and not report it as income. 

Yes, you read that correctly: under the Internal Revenue Code, if you rent a dwelling unit for 14 days or fewer during a calendar year, that income is completely tax-free. My client was absolutely astounded and delighted to hear that he wouldn’t have to pay tax on his Super Bowl rental income.

Tax-Free Rental Income for corporate shareholder

So, how does a corporate shareholder receive and use code section 280(a) to get tax-free rental income? Here are a few ideas for you.  

Your corporation rents your house for a training, annual picnic, or holiday party and pays you—the homeowner—fair rental value. Consider a company retreat to your cabin up north or your condo in Florida.  You have greater opportunities.

 

 

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