What is the Rental income exclusion?

Rental income exclusion is a tax benefit that allows property owners to exclude qualifying rental income from their gross income under specific IRS provisions, most notably IRC Section 280A(g). This exclusion will enable homeowners to receive rental payments without incurring tax liability when the property is rented for 14 days or fewer per year. The exclusion applies to any residential dwelling used as a personal residence, requires fair market rental rates, and demands comprehensive documentation of rental agreements and business purposes. Unlike rental property income reported on Schedule E, excluded rental income requires no expense deductions and generates no depreciation recapture upon sale of the property. Strategic implementation often involves coordination with Augusta rule strategies to optimize maximum tax benefits across multiple planning periods.

Related Terms

What is the Augusta Rule?

What is the Fair market rental value?

What is a Tax deduction?

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