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A Tax "Loophole" That Will Help You Pay for Your Dream Vacation HomeBy
Thursday, February 12, 2015
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 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 their primary residence or a vacation home anywhere in the country for up to 14 days each year... and pay no taxes on the rental income.
(NOTE: If it's your vacation home, you do need to spend at least 14 days per year there to prove it's not just a rental property.)
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 NotesA GOOD SIGN FOR THE U.S. ECONOMY A familiar Market Notes face just beat Wall Street earnings estimates... and that's great news for America.
Over the past three years, we have published dozens of charts that proved America was doing a heck of a lot better than the pessimists would have you believe. One of the clearest signals, we've often said, is the climbing revenue and share price of Wyndham Worldwide (WYN). It's one of the most important stocks most people have never heard about.
Wyndham Worldwide is the world's largest hotel chain. Brands here include Super 8, Howard Johnson, Ramada, and Days Inn. Wyndham owns several "upscale" hotel chains as well. The fortunes of hotels rise and fall with America's propensity to take business trips and vacations... so they're a good indicator of what's going on in the economy.
As you can see from the three-year chart below, things have been going well. And on Tuesday, the company reported fourth-quarter earnings that beat analyst expectations... and raised its guidance for 2015. The news sent the stock to a new all-time high of more than $89 per share. It's more proof that "things can't be all that bad" in America.
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