In this episode of Coffee with Carl, attorney Carl Zoellner goes over the basics of using the Section 280A deduction for tax-free income.
Updated August 7, 2020
The Section 280A deduction is a great way to put tax-free money into your pocket. Not only that, but Section 280A also lets you take a corporate deduction at the same time. Understandably, it’s a strategy I often recommend to my clients. But how do you do it?
Section 280A of the Internal Revenue Code allows up to 14 days of the rental of a dwelling unit without having to report the income from that rental. If you have active businesses or invest in real estate with a corporation, you should know about this deduction. Section 280A allows you to rent your personal residence to your corporation for meeting space for up to 14 days without having to report the rental income. PLUS the rental cost is deductible to your corporation.
This is the gold standard I recommend to clients. Rent your personal residence for up to 14 days to your corporation. It’s a deduction to your corporation plus it’s legal, unreported income in your pocket.
So, how much benefit can you get out of this? To figure out, you’ll have to know the daily rate you can charge your corporation to rent your personal residence. To calculate your daily rate, call hotels in the same general area, get three quotes, take the median of those quotes, and that’s your daily rental charge.
It’s not often the IRS allows us to double-dip like this, so I encourage you to take advantage of Section 280A.
Watch as Carl breaks down using the Section 280A deduction with your entity structure for legal, unreported (AKA tax-free!) income.
Resources mentioned in this video:
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