Owning a rental property can be a lucrative investment, providing both passive income and potential tax advantages. One particular provision that landlords should be aware of is the 14-day rule, which allows property owners to forgo reporting rental income if the property is rented for less than 14 days in a given year.
The 14-day rule, as per the Internal Revenue Service (IRS), states that rental income from a property rented for less than 14 days within a tax year is considered exempt from income reporting. This provision primarily benefits individuals who rent out their property for short periods, such as during a major sporting event or a popular local festival. By taking advantage of the 14-day rule, landlords can enjoy a temporary tax break. Since the rental income is not reported, it does not contribute to their taxable income, resulting in potential savings. Additionally, rental expenses, such as property maintenance, repairs, and mortgage interest, can still be deducted, further reducing the overall tax liability.
The 14-day rule offers a valuable tax advantage for property owners renting their property for short durations. What does this mean for you? Your business can rent property that you own at a fair market rate (ie your home, land, other personal property) for up to 14 days and you do not need to report the income personally. This means your business gets an expense, and you receive tax-free income. Common events that count as a rental could be employee related events such as training and meetings, as well as client events such as appreciations, networking, and sales.
Schedule time with us today to discuss how to implement this strategy in your business!