Question: Denzel and Devan are looking forward to the upcoming football season. Due to the proximity of their residence to the stadium, they make extra money by renting out a spare room in their home for the eight regular home games and two pre-season games for $200 per night. How do they report this $2,000 in rental income for the year on their tax return?
Answer: Under IRC §61, gross income means all income from whatever source derived, unless there is an exception. Since they are renting out their property for less than 15 days during the year, the short-term rental income is exempt from income tax under §280A(g)(1), commonly referred to as the “Augusta rule” after the Masters golf tournament in Augusta, GA. Therefore, this income does not need to be reported on Schedule 1, nor Schedule E, of their Form 1040, U.S. Individual Income Tax Return.
About National Association of Tax ProfessionalsThe National Association of Tax Professionals (NATP) is the largest association dedicated to equipping tax professionals with the resources, connections and education they need to provide the highest level of service to their clients. NATP is comprised of over 23,000 leading tax professionals who believe in a superior standard of ethics and exemplify professional excellence. Members rely on NATP to deliver professional connections, content expertise and advocacy that provides them with the support they need to best serve their clients. The organization welcomes all tax professionals in their quest to continually meet the needs of the public, no matter where they are in their careers.
The NATP headquarters is located in Appleton, WI. To learn more, visit www.natptax.com.
Information included in this article is accurate as of the publish date. This post is not reflective of tax law changes or IRS guidance that may have occurred after the date of publishing.