05 Nov Simple Strategy for 100% Tax-Free Rental Income!
Generally rental income is similar to any other income, its taxable income subject to income tax.
However, there is a loophole known by a very few, that allows in the tax law certain amount of tax-free rental income. Yes, tax-free, and not reported on your tax return.
Requirements–Rent a dwelling that qualifies as one of your residences and rent that residence for less than 15 days during the tax year!
Example-Mr. Taxpayer owns home on Merion Golf Course. Every so often there is a major gold tournament played there, and he rents his home for 12 days for $10,000, and no other days during the tax year. These funds collected are tax-free!! Per the tax code IRC Section 280A(g).
To review the requirements a bot in further detail.
- Rental unit must be a dwelling such as a house, condo, boat, mobile home, and similar property; and provide living accommodations.
- The dwelling must be used as a residence–used for personal purposes more than 14 days or 10% of the days you rent the dwelling
- Short Term rentals OK, just keep to the under 15 days
- 1099’s received –no problem –just report income and under other expenses enter “Section 280A(g) Exclusion”
As stated, this is a legal and ethical tax strategy supported by the Internal Revenue Code.