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Renting out primary residence tax free - the 14 day rule

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  • Tim
    replied
    "luxury homes for $5,000–$10,000 per night, and a two-bedroom high-rise apartment is asking $8,000 per night"

    Minimum nights as well.

    Leave a comment:


  • hillaj1
    replied
    Originally posted by VentAlarm View Post
    No. Gross. Would I have previously subletted my apartment? Sure. Would I rent out my home that I own worth high 6 figures where my wife, kids and I sleep - not a chance. The desire to do this as an attending and living outside of somewhere like Augusta borders on pathological.

    Although this does seem like a way you could get around estate tax. In-laws stay with you for 14 days every year at 1k/night, adds14k/couple. Divide that among 3 kids and you’ve excluded almost a half million from your estate over a decade. Curious if Joanna has any thoughts?
    Looks like the IRS says no to renting to family tax free.

    "A day of personal use of a dwelling unit is any day that the unit is used by:
    • You or any other person who has an interest in it, unless you rent your interest to another owner as his or her main home and the other owner pays a fair rental price under a shared equity financing agreement
    • A member of your family or of a family of any other person who has an interest in it, unless the family member uses it as his or her main home and pays a fair rental price
    • Anyone under an agreement that lets you use some other dwelling unit
    • Anyone at less than fair rental price"
    https://www.irs.gov/taxtopics/tc415

    Leave a comment:


  • VentAlarm
    replied
    No. Gross. Would I have previously subletted my apartment? Sure. Would I rent out my home that I own worth high 6 figures where my wife, kids and I sleep - not a chance. The desire to do this as an attending and living outside of somewhere like Augusta borders on pathological.

    Although this does seem like a way you could get around estate tax. In-laws stay with you for 14 days every year at 1k/night, adds14k/couple. Divide that among 3 kids and you’ve excluded almost a half million from your estate over a decade. Curious if Joanna has any thoughts?

    Leave a comment:


  • jz-
    replied
    I've considered <14 day rental of our vacation home, likely to golf nuts. Then I consider potential property damage or increased property insurance. Instead I've allowed friends to use it for free, generating good will.

    Leave a comment:


  • DavidGlennCPA
    replied
    While a valid and legitimate strategy, I've always thought the benefit of this is overblown, especially when it comes to renting your house to your practice for meetings.

    What's really the going rate for your living room for a two-hour meeting?

    It just seems like a lot of hassle for tax-free income.

    But everyone has their own values when it comes to this kind of thing and some find it worth the effort. I'm just not one of them.

    Leave a comment:


  • Tim
    replied
    There are specific locations/events that can make this extremely profitable. These are limited. Think Superbowl and PGA Tour events.
    I would not think the short term rental even in peak times would make it worthwhile. The controlled business function seems to work.
    2 cents value in the advice.

    Leave a comment:


  • Hank
    replied
    Makes a lot more sense to do this if you own your own practice. You’re going to have annual and quarterly planning meetings for your business anyway, why not have them at your house? If the planning meeting happens to be at the same time as a local bowl game, golf tournament, or other big event when short term home rentals are at the highest price of the year, so much the better.

    It’s an expense to the business and tax free income to you personally. You do need a legitimate business need, documentation of comparable rental prices at that time, in that location, for that sort of home, and you should have corporate meeting minutes (both because you need them at an annual or quarterly meeting anyway and as a contemporaneous record that you really conducted your business meeting at the house).

    Leave a comment:


  • Bev
    replied
    No way! I would rent out a detached garage apartment.

    Leave a comment:


  • hillaj1
    replied
    Did this back in medical school during the Masters golf tournament every year. Would sleep in a call room at the hospital if having to work. Pretty sure golf patrons who can afford Masters tickets are about the lowest risk "tenants" on earth. That being said, I wouldn't rent out my primary residence these days. It would have to be more SIGNIFICANTLY more than I could make working extra to justify having strangers sleeping, eating, procreating, etc. in my home.

    My advice, keep your primary residence separate unless you are a resident.

    Leave a comment:


  • Lordosis
    replied
    Where will you live if you are renting out your home? Also eww

    Leave a comment:


  • Renting out primary residence tax free - the 14 day rule

    Has anyone rented or considered renting their primary residence out for 14 days or less during the year to take advantage of the tax free income allowed by doing this? The IRS says that if rented for a fair market rate, rental income for 14 days or less is tax free. The days do not have to be consecutive.

    Browsing Airbnb I see homes similar to ones we have looked at renting for $500+/night, some over $1000/night in peak times. I have no plans to factor in this possibility into the decision to purchase a certain home, but on the other hand, like many on this site, I am quite frugal and I don't think I could bring myself to pass up this type of tax free income if it were a possibility in whatever home we choose, and these 14 days could easily be coordinated to coincide with times we are traveling/visiting family.

    My main concerns would be about the risks of doing this. Would potential liability or property damage make it not worth the risk? I have also heard of squatters in Airbnb properties which gives me pause.

    Has anyone used their primary residence to generate income in other ways? We have looked at some homes with separate in-law/guest quarters and my frugal side starts to think of ways to rent this out to offset the costs of the property. I am interested to hear others' experiences. Should a primary residence and income generation be kept completely separate?
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