Simple Strategy for 100% Tax-Free Rental Income!

November 5th, 2016 at 9:33 AM

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.

  1. Rental unit must be a dwelling such as a house, condo, boat, mobile home, and similar property; and provide living accommodations.
  2. 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
  3. Short Term rentals OK, just keep to the under 15 days
  4. 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.


Are you overpaying your taxes?
Let's Talk