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Understanding the 14-Day Rule: A Tax-Efficient Way to Rent Out Your Home


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October 22, 2023

Renting out your home can be a smart way to generate additional income, whether you're renting a room through platforms like Airbnb or letting your entire home while you're away. However, the tax implications of rental income can be a concern for many homeowners. Fortunately, there's a tax-efficient strategy known as the "14-Day Rule" that can help you make the most of your rental income without incurring significant tax liability.

Here's a breakdown of the 14-Day Rule and how it can work in your favor:

1. What is the 14-Day Rule?

The 14-Day Rule is a provision in the U.S. tax code that allows homeowners to rent out their primary residence for up to 14 days each year without paying any federal income tax on the rental income they receive. This means that if you rent your home for 14 days or less during the year, you can pocket the entire rental income without sharing it with Uncle Sam.

2. Qualifying for the 14-Day Rule:

To benefit from the 14-Day Rule, it's crucial that your property qualifies as your primary residence. This typically means you use the property for personal purposes for at least 14 days or more during the year or at least 10% of the total days you rent it out, whichever is greater. If you meet these criteria, your rental income will remain tax-free.

3. Flexibility for Short-Term Rentals:

The 14-Day Rule is particularly advantageous for homeowners who want to dip their toes into short-term rentals through platforms like Airbnb or VRBO. You can rent your home for a couple of weeks during peak tourist seasons, special events, or holidays, and not worry about tax implications.

4. Record-Keeping is Key:

While the rental income may be tax-free, it's important to maintain detailed records of your rental activities. Keep track of rental periods, income received, and expenses incurred. This documentation will be invaluable if you ever need to prove your eligibility for the 14-Day Rule, especially in case of an audit by the IRS.

5. Personal Use Caution:

To keep the rental income tax-free, be mindful of your personal use of the property. If you exceed the 14-day or 10% limit, your rental income may become subject to taxation. Careful planning of your use of the property can help you remain within these thresholds.

It's essential to note that the 14-Day Rule applies at the federal level. State and local taxes on rental income may still apply, so it's advisable to consult with a tax professional who is familiar with the tax laws in your specific area to ensure you remain compliant with all regulations.

The 14-Day Rule is a valuable strategy for homeowners looking to rent out their homes without the tax burden. It provides the opportunity to earn extra income while maintaining flexibility and control over your property. Whether you're exploring short-term rentals or just considering occasional rentals, understanding, and utilizing the 14-Day Rule can be a tax-efficient way to make the most of your primary residence without fretting about tax bills.

If you would like to receive more information on making smart money moves for your future, be sure to contact us today!


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About the author

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Eric Pucciarelli

Managing Director, Private CFO®

Eric is a native of Atlanta, he graduated from Georgia Southern University with a bachelor's degree in Business Management and a Master's of Business Administration.

Eric's credentials include:

  • Series 7 (General Securities Representative);
  • Series 66 (Uniformed Combined State La;
  • Masters of Business Administration;
  • Chartered Retirement Planning Counselor;
  • Past board member of the Georgia Southern Alumni Association.

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. oXYGen Financial is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do not provide tax or legal advice. Investor Disclosures: https://bit.ly/KF-Disclosures

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.

Background and qualification information is available at FINRA's BrokerCheck website.

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Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. oXYGen Financial is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do not provide tax or legal advice. https://Bit.ly/KF-Disclosures

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