Home Rental can Provide Tax-Free Income
Do you notice that every year during your town’s biggest festival/fair/event traffic gets out of control, lines at the grocery store are longer and the wait at your favorite restaurant is double the usual amount of time? This year you may be able to avoid all of that and make some quick cash while you are at it. The secret? Renting out your home.
It may sound crazy, but stay with us. If you rent out your home for a period less than 14 days, Uncle Sam will not even require you to report the short-term rent money. So, that means that you can head out on vacation and make money that is free from any federal tax.
Does this sound too good to be true? Listen up!
The IRS’ Tax Topic 415, Renting Residential and Vacation Property states:
“There is a special rule if you use a dwelling as a home and rent it for fewer than 15 days. In this case, do not report any of the rental income and do not deduct any expenses as rental expenses.”
So, rather than endure the influx of people this year why not take a vacation? You may be able to rent your home out for enough that your vacation is paid for by the rent! An all-expense paid vacation, just for renting out your home. That sounds like a great idea to us!
If you are going to rent out your home, it is important that you screen the potential renters. Make sure that you have rules established and a contract drafted properly to ensure that any damage that a renter leaves will be the responsibility of the renter to fix.
So, take a break this year. Enjoy some tax-free rental income and head out of town!