"14 day rule" for taxes

[Trevor68]

Can anyone help me determine if I have rented my house out for 14 days? Seems like a silly question, but I have several weekend rentals where a person checks in on Friday and checks out Sunday. I have rented my house out for 14 nights total, but if I count the day someone checks out the total is 21 days. 

Basically do I count the day someone checks out when considering the 14 day rule, or is it just the nights they actually stay at my home?

[James544]

I think you are thinking of the 14 day rule for YOU being at the house.  If YOU spend 14 days per year at the house, it is considered a secondary house, not a rental.  Therefore, if it is a secondary house, you are not able to do the same amount of deductions you can have if it is purely a rental (YOU spent less than 14 days at the house).

"If personal days exceed 14 days or 10% of the number of days the home is rented (whichever is greater), the IRS considers the property a personal residence andrental loss cannot be deducted. Rental expenses, up to the level of rental income, as well as property taxes and mortgage interest can still be deducted."

[Trevor68]

Thanks for the reply. The rule you are describing doesn't seem to be the one I am talking about...

Here is an excerpt from turbotax detailing the tax law I am referring to:

the 14-day rule—sometimes called the "Masters exception" because of its popularity in Georgia during the annual Masters golf tournament—is the most important for anyone considering renting out a vacation home. Under this rule, you don't pay tax on income you earn from the short-term rental, as long as you:

• Rent the property for no more than 14 days during the year AND
• Use the vacation house yourself 14 days or more during the year or at least 10% of the total days you rent it to others.

Here is the link to turbotax discussing the rule I am talking about... https://turbotax.intuit.com/tax-tips/rental-property/10-tax-tips-for-airbnb-homeaway-vrbo-vacation-r...

The house I use is actually my personal house so the 14 day minimum is exceeded. You do bring up a good point though, does anyone know if this rule only works for second/vacation homes? Am I just overthinking this topic altogether?

[Matthew285]

@Trevor68 don't think about the days. Only think about the nights people stayed.

Otherwise, if you count the "days" where Friday- Sunday is 3 "days", you could end up with 8, 9, or 10 "days" in a week, which obviously isn't so.

Example

Guest 1: Stayed Jan 1-3 which is 3 days, 2 nights

Guest 2: Stayed Jan 3-6 which is 4 days, 3 nights

Guest 3: Stayed Jan 6-8 which is 3 days, 2 nights

So if you count the days, the host managed to rent out 10 days in one week. Amazing!

Only count the nights.

[Rachael26]

@Trevor68 - this is a common issue, so you will be helping others by bringing this one up here - so thank you!

@Matthew285 is correct -

the IRS allow 14 nights booked before you have to declare income received from short term rental bookings.

Its the same with the booking calendar - it's the night that counts.

Rachael 🙂

[Trevor68]

@Matthew285,  thank you for your help. Your explanation makes so much more sense to me than what I have seen around the internet. 

[Angela1073]

Does the 14 day no tax rule apply:

14  or less days with each rental?

Or, 14 days total per calendar year?

 Thank you!

[Letti0]

@Angela1073  It would 14 calendar days maximum per year to not have to claim the income. I know someone that I rented from over Christmas and New Years for 2 weeks in Lahaina Maui, must rent both weeks in full. She charged me $32,000 for the 14 nights with $2000 of it returned later as a security deposit. It was Aloha Rentals or something. Those days are actually split between two years, so she has extra days still per year to rent out for special events happening addition to that and all the money is tax free. I can see this loophole being closed in the future for this reason she's getting in the area of $25,000-$35,000 tax free per year. 

[George1280]

Are you able to avoid the taxes all together by having your bank account be off-shore?

Moreover, if your property address is not located in the U.S. do you still have pay taxes ? 

Moreover, if I make my host a non-U.S. citizen and have them set up their non-U.S. bank account, who pays the taxes? 

[Sarah977]

@George1280  "if I make my host a non-U.S. citizen" ???

What does that even mean?  

Moreover, I suggest you familiarize yourself with the FATCA laws. The US and Eritrea are the only countries in the world who tax their citizens as opposed to their residents. So if you are a US citizen or US "person" (and the IRS has a very broad interpretation of that) you are supposed to report all worldwide income.

For instance, unbelievably, if you were born outside of the US, and have never stepped foot in the US or held a US passport, but one of your parents was a US citizen when you were born, they consider you to be a "US person". When they brought in that law about 8 years ago, I recall, there was a mad rush to renounce your US citizenship by people like I mentioned. It used to cost about $400 to renounce your citizenship, but when people started clamoring to do it, they raised the cost to over $4000.