Today TaxMama® doesn’t have any interesting questions in the TaxQuips Forum. So let’s close this week with something interesting. I’m going to tell you how to collect rental income without paying any taxes at all.
As the Olympics get under way, it reminds me of someone who was at the lowest point in his life. He had just bankrupted a dozen partnerships, cost several families and close friends their life savings, and lost just about everything he owned, including his precious, classic silver Jaguar.
But the Olympics were coming to Southern California – and there was going to be a shortage of lodging. Layne knew lots of people with wonderful homes not too far from the ocean. He asked me to help him start a business to rent those homes out to visitors to the Olympics. That’s when I learned a terrific tax secret.
When you only rent out your home or vacation for 14 days or less in a year – none of the income is taxable. Not a dime. Rent it for 15 days – and it’s all taxable. Layne built an entire business around this that lasted for the next 10 years until he died. He housed Sheiks and princes and dignitaries from around the world, as well as folks like you and me. And people in Southern Cal pocketed anywhere from a few hundred dollars to several thousand dollars a year – some of it untaxed.
You can do the same thing by posting your home on a variety of vacation boards. But be very careful about your choice of temporary tenants. BottomLine Secrets lists a few places to find vacation rentals – also a good place to post your own.
Incidentally, another way to benefit from this tax break is to rent your home to film makers. Not only will they pay you a very generous rental fee, they will often make repairs or improvements to your home while they are there (like carpeting, painting, fixing sliding glass doors, etc.). Since they are the leaseholders during that time, those are tenant improvements – not taxable to you.
And remember, you can find answers to all kinds of questions about untaxed income and other tax issues, free. Where? Where else? At www.TaxMama.com.[Note: If you were subscribed to the e-mailed version of TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]
Please post all Comments and Replies in the new TaxQuips Forum .