The New York Times says that homeowners in Charlotte, NC are increasingly wondering whether they could reap a mini-windfall by renting out their houses for the Democratic National Convention
A tax loophole may help them decide: The money they get could be free of all federal income tax.
Here’s the deal: While all rental income ordinarily has to be declared, there’s a little loophole for anyone renting our their home (or second home, for that matter) for no more than 14 days during the year. Keep that rental use to no more than two weeks, and the rent you take in is tax-free. You also don’t have to keep track of any expenses related to the rental, of course.
The 14-day test is the key. It doesn’t matter if you get $100 a night or $10,000 a night — it’s all tax-free. But if you rent your property out a total of 15 or more days during the year, the loophole closes.
I think of this as the Masters Loophole, because it is very popular with people who own pleasant homes that become extremely attractive rentals for brief periods of time. Think the week of the Masters Golf Tournament in Augusta, Georgia.
When will this little loophole be closed? Probably when there are no longer any Congresspeople who have vacation homes that they’d like to rent out tax-free for a couple of weeks a year.