| Real estate is one of my absolute favorite areas | | | | likely lead to a large loss because these expenses |
| in the tax law. Why? Because there is so much | | | | (even pro-rated for the rental period) typically |
| flexibility in how to do things in order to legally | | | | outweigh the rental income. So, the rule takes a |
| maximize the tax benefits available. | | | | conservative approach by making the expenses |
| Did You Know You Can Receive Rental Income | | | | non-deductible and the income non-taxable. |
| Tax-Free? | | | | Ways to Apply this Strategy |
| Of course, there are specific rules behind this | | | | While the rule is most often used in the situation |
| permanent tax saving strategy. I find that after I | | | | of vacation homes to prevent taxpayers from |
| go through the rules with my clients, we usually | | | | claiming rental losses on a property rented 14 |
| find a way to use this strategy - legally - and it | | | | days or less per year, it can be applied to any |
| creates another stream of permanent tax | | | | property - including your residence! |
| savings. Plus, this strategy can be used every | | | | You've probably heard of people renting their |
| year so these are annual permanent tax savings! | | | | home for a week to out-of-town visitors coming |
| General Rule | | | | into town for big sports and entertainment |
| The rule is applied most often to vacation homes. | | | | venues. As long as the total days rented doesn't |
| The rule prevents taxpayers from deducting large | | | | exceed 14, the rental income they receive is |
| expenses as rental real estate expenses for | | | | tax-free. |
| maintaining their vacation home. | | | | Now, some of us may not be too excited to rent |
| The rule states that if you rent your property for | | | | our home to strangers, but perhaps there are |
| 14 days or less per year, then the expenses that | | | | people (or even companies) we know who may |
| are not otherwise deductible are considered | | | | want to rent our homes for a short period of |
| personal non-deductible expenses. This means no | | | | time. |
| deduction for utilities, insurance, maintenance or | | | | As I mentioned previously, usually my clients and I |
| similar expenses. It also means no depreciation | | | | are successful in finding ways to use this great |
| deduction. | | | | permanent tax savings strategy. At first, many |
| On the flip side, however, the rental income | | | | clients don't think it will apply to them, but after |
| received is tax-free. | | | | they are able to think about it as they go through |
| The reasoning behind this rule is that If the | | | | their day-to-day activities, they find a way to use |
| expenses were allowed to be deducted, it would | | | | it - legally! |