Larry, is it possible to rent out my vacation home for a business? Tina
Tina, I received your note about the possibility of renting your house to your corporation and taking a deduction. I think this is an excellent idea, as long as we follow the rules.
First of all, the tax law allows you to rent out your house for 14 days tax free. The income that is received for those 14 days is not taxable to you. At the same time, you do not have to reduce any of your interest or real estate taxes as a deduction. This 14 day rule is what is referred to as de minimus (meaning so small, not worth the effort to keep track of).
An important element of audit proofing this deduction is making sure that you have good documentation; documentation at the time that you’re using the house for your staff training. You can attain this with the following:
- Pictures of the event
- An agenda for items that are going to be covered during each of the days
- A signed log of people in attendance
The other item that you need to do is document the fair market value of the rental. You can do this by going to different venues that offer space for daily meetings and determine what that reasonable cost would be. Keep a file of this in case the IRS ever wonders how you arrived at the fair market rental. You want to be aggressive but remember the old saying, “Pigs get fed and hogs get slaughtered.”
You would want the corporation to write a check to you personally. This check would then be deposited into your personal account.Remember that 100% of the food and beverages that you provide at those meetings would be deductible. Many times people erroneously only deduct 50% of the food and beverages. Keep this separate in your QuickBooks.
If you have any other questions on this or other matters, please feel free to contact me.
It is a pleasure serving you.
Larry Kopsa, CPA
