Donald J. Trump’s second inauguration is Monday, Jan. 20, but not as originally planned.
An Arctic Blast next week across much of the country, including the Washington, D.C. area, means the official swearing in ceremony will be moved indoors, to the U.S. Capitol Rotunda.
The change obviously is a disappointment for many of the Trump supporters who traveled to the national capital to witness the event in person.
On the other hand, it matters little to the District of Columbia and neighboring Maryland and Virginia residents who decided to skip not only the inauguration, but town.
For some, the reason for leaving is political.
Others, however, were motivated to temporarily vacate the area and their premises for some tax-free income.
They rented their homes to the Make America Great Again visitors. And as long at the paying guests don’t stay too long, the money they pay for the more-homey accommodations is tax free to the short-term landlords.
Tax benefit of very short-term home rental: The tax code says if you rent your residence (or vacation home) for 14 or fewer days in a year, those real estate transactions are tax-free.
It’s no surprise that this tax break is being taken this coming week by those who live in Capitol Hill’s backyard. Some might even be Congressional staff (or members) who work on tax matters during the rest of the year.
The presidential inauguration every four years is just the kind of disruption to their routines they seek to escape. Escaping the crazy and crowds while simultaneously making a few tax-free dollars, or many more in the cases of some rentals, off tourists eager for lodging during a time when traditional accommodations are scarce is just a bonus.
And similar circumstances crop up nationwide year-round. The ones that come immediately to mind are special sporting events, like the NFL Super Bowl and NCAA March Madness basketball games.
In fact, Internal Revenue Code Section 280(A) that allows homeowners to exclude rental income collected from leasing their personal residences for less than 15 days is nicknamed “the Masters Rule,” since the annual professional golf tournament at Augusta National in Georgia was, per the tax story, the impetus for the law.
But there also are entertainment spectacles, such as South by Southwest and Austin City Limits musical festivals here in Austin, and nationwide throughout the year.
Keep track of rental days: Of course, any time you're dealing with special tax situations, you need to be careful.
As noted earlier, this isn’t a tax break for folks who regularly share their houses via Airbnb or Vrbo for much of the year. The no-tax rent provision applies only in cases where you lease your primary or second home for two or fewer weeks, specifically 14 days max.
The tax break also applies to any amount of rent you get for the short-term lease.
So, the owner-occupant of the Capitol Hill rowhouse who rents her personal abode to a couple who wants to be close to the inaugural action for $10,000 from Jan. 19 through Jan. 22 gets to pocket all that cash without sharing any with Uncle Sam.
In fact, the homeowner doesn’t even have to report the rental income on her annual tax returns.
That’s the case for the tax-free inauguration gouging rent as long as the Washington, D.C., residence isn’t rented again later this year for more than 10 days. If the owner goes over the 14 days of annual rental limit, all the rent is taxable income.
Don't forget state/local requirements: You'll also need to be aware of local taxes that could affect your short-term residential rental.
Most jurisdictions require residential hosts, whether they offer a few short-term or multiple longer-stay leases throughout the year, to register with tax and other governmental authorities before collecting any taxes.
Many states and cites also collect a surtax on all types of rentals.
So, if you're looking to make some tax-free bucks on a short-term lease of your home, know the tax rules, local, state, and federal.
More on the federal tax matters can be found at the IRS’ overview in Topic no. 415, Renting residential and vacation property, and in more detail in IRS Publication 527, Residential Rental Property (Including Rental of Vacation Homes).
Even better, consult your tax advisor, or get one, beforehand to make sure you don't screw things up and end up costing yourself unexpected residential rental tax trouble.
You also might find these items of interest:
- Airbnb to pay $628 million to settle Italian tax dispute
- Summer home rentals net some owners tax-free income
- Popular home-related tax benefits already in the tax code
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