Large events, such as the Super Bowl, political national conventions, major car shows and other large events bring in money to the community and people -- lots and lots of people. If you've ever experienced the type of traffic or crowds these events bring in, you might be wondering how you can capitalize financially from it.
If you have a guest room in your home, or a college student's room that's empty the majority of the year, you can rent it out. The best part is that if you keep good records, you don't have to pay taxes on the income. This guide explains what you need to keep track of, so you can enjoy the money without tax liability.
Keep Track of Expenses
Renting out a room in your home, or even your entire home does not come without at least some expenses. Keep a spreadsheet of the following, so that in the event the Internal Revenue Service asks you questions, you'll be prepared with the ammunition you need:
- utility costs during the rental period
- your hotel and travel expenses if you're leaving the home
- third party finder's fees
- cleaning fees (both before and after the event)
- any permits required for the rental
- advertising if renting the property out yourself
- gifts left for the renters
Keep Track of Rental Time
The IRS does not require you to pay taxes on rental income if the rental period is less than 15 days out of the year. So, if an event lasts only for a weekend, you can collect the rent and not report it at all.
The 15-day requirement does not have to be in one shot. If there are a few weekend events occurring throughout the year in your city, you can rent to different people during those times. As long as you don't go over 15 days during the year, (from January 1st through December 31st), you don't have to pay taxes.
Consideration: If you don't rent out a room in your home, or the entire thing for more than 15 days out of the year, then you don't need the expense report. However, it is always a good idea to keep track of it, just in case the IRS requests it.
Ask a real estate attorney like those at Madigan & Scott Inc. for more ideas on using your home to create additional wealth with no or little tax liability. Renting out a portion of your home can be a great way to offset your mortgage, or to obtain the money you and your family need for a great vacation of your own.