Hidden Tax Breaks That Most People Qualify For but Often Overlook

Tax season can be overwhelming, with countless deductions and allowances to consider. Many overlook seemingly complicated provisions in the Internal Revenue Code (IRC) that can significantly benefit them. One such provision is IRC § 280A, which allows individuals to benefit from tax breaks they may not have been aware of. In this article, we will explore some lesser-known tax tips in the IRC that are within reach for most people but often go unnoticed.

Lesser-Known Tax Breaks in the IRC

The Internal Revenue Code (IRC) is vast and complex, encompassing numerous rules and regulations. Many sections of the IRC require specific qualifications, such as having a large investment, itemizing deductions, or taking on significant risks. However, there are several tax breaks available to individuals that may not be widely known. These tax breaks can save you money and simplify your tax preparations.

The Surprisingly Permissive IRC § 280A

Section 280A of the IRC pertains to disallowance of certain expenses in connection with business use of homes, rental of vacation homes, etc. However, the title can be slightly misleading, leading many to assume it eliminates all deductions. Upon closer inspection, subsection (g) offers a surprising benefit:

The Subsection “Special Rule for Certain Rental Use”

Subsection (g) stipulates that if a dwelling unit is used during a taxable year as a residence and is rented for less than 15 days in that same year, then:

No deduction is allowed for any expenses related to the rental use of such dwelling unit. Income derived from such rental use is not included in the gross income of the taxpayer under section 61.

In essence, if you rent your home for 14 days or fewer in a year, you do not have to report the income or deduct the expenses. This means you can rent your home while you are away on vacation and keep the money without any tax implications.

Examples of Practical Uses for the Tax Break

Movie Filming Opportunities: While a movie or TV series is being filmed nearby, you can rent your home to the production company for housing the cast and crew. Your clients can earn rental income, and you won’t have to pay taxes on it. Major Sporting Events: If a big sporting event is taking place nearby, you can rent your home to visitors or fans. Again, all the income you earn will be tax-free as long as you use the home for personal residence for that same period. Vacation Rentals: Renting your home for a short stay when you go on vacation with your family or friends can provide additional income that is not subject to taxation.

Expanding Your Knowledge of Tax Code

By understanding these less-known provisions of the IRC, you can take advantage of tax breaks that many may overlook. It’s important to stay informed about changes in the tax code, as the laws evolve and new provisions are added. Consulting with a tax professional is also highly recommended to ensure you are utilizing all available breaks.

Conclusion

Tax season can be daunting, but with a little extra knowledge of the IRC, you can discover tax breaks that can help simplify your filings and save you money. Remember to consult with a tax expert to ensure you are taking advantage of all the benefits available.

References

Section 61 of the Internal Revenue Code (IRC)

Further Reading

Understanding the complexities of the Internal Revenue Code (IRC) Exploring IRC § 280A in detail Maximizing your tax savings with lesser-known provisions