Don't Mess With Taxes

UPDATE, Jan. 31, 2017: Super Bowl LII is this weekend. That means host city Minneapolis is flooded with visitors. Some of them are staying in private residences, which means the home owners could pocket some tax-free cash as long as they follow the short-term rental tax rules.

It's been a good couple of years for Philadelphia tourism officials and for folks who rented out their homes to the city's visitors.

Independence Hall in Philadelphia, where the Founding Fathers debated and adopted both the U.S. Declaration of Independence and U.S. Constitution. Click image for a montage of other notable Philly sites. (Photo by J. Leon via Wikipedia)

Last September, Pope Francis included the City of Brotherly Love in his U.S. visit itinerary. This week, the Democratic National Convention has taken over Philly.

Making money-making space: When big events like these are held, many full-time residents decide to literally get out of town to avoid the craziness that accompanies the influx of visitors. In some cases, however, their homes are not vacant.

They rent them to the out-of-towners.

Being a diligent short-term landlord has several benefits.

Your home remains occupied, meaning you don't have to worry about burglars taking advantage of your absence.

You get some extra cash, often a lot depending on how popular with visitors the event that you're evading is.

And if you follow the U.S. tax rules, the money you make on your short-term rental is tax-free.

14-day rental tax advantage: The key here is the duration of your temporary lease. If you rent your home or your second home for less than two full weeks a year, that money is not taxable.

Folks in Philly got lucky. Two big events, bringing in lots of visitors who might prefer staying at in a real residence instead of a Residence Inn, in two different tax years. That gave them 14 days in 2015 and 14 more this year, meaning they didn't have to worry so much about possibly busting the tax-free rental limit and owing taxes on the income.

There are, of course, other potential tax complications, especially when it's a second property, like a vacation home, that's being leased. But even then, as long as you follow the Internal Revenue Service rules, you can make some extra cash and minimize any tax cost.

The latest Weekly Tax Tip featured over at Bankrate has the short-term rental tax details. I also took a look at this temporary landlord tax saving option for NerdWallet.

After you check it out, look at your area's tourism calendar and see if you might be able to pocket some tax-free rent from visitors to an upcoming event near you.

You also might find these items of interest:

• Are you willing to pay more to cover Airbnb taxes?  
• Private, and often untaxed, home rentals under fire
• Dealing with a 1099-K for tax-free residential rental income