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A Tax "Loophole" That Will Help You Pay for Your Dream Vacation HomeBy
Friday, April 19, 2013
I bet you've never heard of this...
It's a special government loophole... that allows you to earn extra cash, totally tax-free. It's 100% legal and simple to use. It can even help you pay for a dream vacation home.
This loophole is not for everyone. But if you qualify, you should start collecting this income right away.
I call this loophole the "Masters exemption."
That's because every year, visitors flock to Augusta, Georgia for the Masters Golf Tournament. And many years ago, the very wealthy course owners lobbied their buddies in Washington, asking for special "consideration"...
In exchange for the hospitality of the locals, they convinced the lawmakers to allow them to "hide" two weeks of rental income from the IRS...
The best part is the loophole isn't just for landowners in Augusta. The IRS allows anyone to rent a vacation or rental property (not a primary residence) anywhere in the country for up to 14 days each year... and pay no taxes on the rental income.
Plus, there's NO limit on the amount you can charge and collect tax-free.
I've personally taken advantage of the "Masters exemption" for the last decade.
I own a home within earshot of the course where they hold the Masters. Every year, I rent it for the week (or two) of the tournament. Every year, I recoup nearly four months of mortgage payments and property taxes, all tax-free.
It's simple to find renters, too... Today, I rely on word of mouth to find my tenants. But I have used Craigslist and the local papers. (The Masters Tournament has a section on its website where you can post your rental listing... although it takes 7% of your income if you do it through them.)
First, I conduct an informal personal background check. I contact their office, their landlord (if they have one), and any other references they provide. And I've never really had a problem. One tenant smoked in the house... but I charged him around $500 for cleaning costs. He paid the charge, no questions asked.
So if you own a rental or vacation property anywhere in the U.S., you should immediately consider taking advantage of the "Masters exemption" yourself.
It's especially easy if you're in a city that's hosting a Super Bowl, World Series, or any sort of professional championship. But wherever your home is... and whatever the season is... here's an opportunity for you to capture easy, tax-free income.
That's true even if you already rent your property out the rest of the year... You just need to have a clause (like I do) that requires your tenants to vacate the property during the "high season." This is how many of the homeowners in Augusta do it.
Obviously, this loophole won't work for everyone. But if you have a second home, the Masters exemption is a low-risk way to put it to work for you.
You can earn safe, tax-free income. And you can potentially make enough money every year to pay for the cash costs and upkeep on your own home.
I do it every year. And you can do it, too.
Here's to our health, wealth, and a great retirement,
Dr. David Eifrig
Further Reading:
A few years back, "Doc" shared another little-known "loophole" that can save you thousands on a classic vacation idea. "Many retirees dream about spending winters in Florida and summers around northern lakes," Doc writes. If that's your dream, too, this is a must-read: How to Take a Nearly Free Vacation.
Our friend Doug Casey has traveled to 175 countries. And he shared the highlights of one of his favorites right here: A Place You Should Visit As Soon As Possible.
Market NotesTAKING THE "LONG VIEW" OF STOCKS... Fear has returned to the market. On Monday, stocks suffered their biggest one-day drop since November. Volatility spiked.
At a time like this, the average investor needs to take a breath, calm down, and consider the "long view" on what's happening...
The "long view" in this case is a picture of the S&P 500 Index since early 2009. This is the index professional investors use to gauge the market's price action.
As you can see, the S&P 500 has enjoyed a "stair step" series of higher highs and higher lows. And while a few days of selling has a lot of people spooked, the long view shows the market could fall much farther from here (say, a 10% correction to around 1,400) and still remain within its long-term uptrend. Keep this bit of perspective in mind...
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