26 USC 280A - Disallowance of certain expenses in connection with business use of home, rental of vacation homes, etc.

U.S Code last checked for updates: May 02, 2024

§ 280A.

Disallowance of certain expenses in connection with business use of home, rental of vacation homes, etc.

(a)

General rule

(b)

Exception for interest, taxes, casualty losses, etc.

(c)

Exceptions for certain business or rental use; limitation on deductions for such use

(1)

Certain business use

Subsection (a) shall not apply to any item to the extent such item is allocable to a portion of the dwelling unit which is exclusively used on a regular basis—

(A)

as the principal place of business for any trade or business of the taxpayer,

(B)

as a place of business which is used by patients, clients, or customers in meeting or dealing with the taxpayer in the normal course of his trade or business, or

(C)

in the case of a separate structure which is not attached to the dwelling unit, in connection with the taxpayer’s trade or business.

In the case of an employee, the preceding sentence shall apply only if the exclusive use referred to in the preceding sentence is for the convenience of his employer. For purposes of subparagraph (A), the term “principal place of business” includes a place of business which is used by the taxpayer for the administrative or management activities of any trade or business of the taxpayer if there is no other fixed location of such trade or business where the taxpayer conducts substantial administrative or management activities of such trade or business.

(2)

Certain storage use

(3)

Rental use

(4)

Use in providing day care services

(A)

In general

(B)

Licensing, etc., requirement

Subparagraph (A) shall apply to items accruing for a period only if the owner or operator of the trade or business referred to in subparagraph (A)—

(i)

has applied for (and such application has not been rejected),

(ii)

has been granted (and such granting has not been revoked), or

(iii)

is exempt from having,

a license, certification, registration, or approval as a day care center or as a family or group day care home under the provisions of any applicable State law. This subparagraph shall apply only to items accruing in periods beginning on or after the first day of the first month which begins more than 90 days after the date of the enactment of the Tax Reduction and Simplification Act of 1977.

(C)

Allocation formula

(5)

Limitation on deductions

(A)

the gross income derived from such use for the taxable year, over

(B)

the sum of—

(i)

the deductions allocable to such use which are allowable under this chapter for the taxable year whether or not such unit (or portion thereof) was so used, and

(ii)

the deductions allocable to the trade or business (or rental activity) in which such use occurs (but which are not allocable to such use) for such taxable year.

Any amount not allowable as a deduction under this chapter by reason of the preceding sentence shall be taken into account as a deduction (allocable to such use) under this chapter for the succeeding taxable year. Any amount taken into account for any taxable year under the preceding sentence shall be subject to the limitation of the 1st sentence of this paragraph whether or not the dwelling unit is used as a residence during such taxable year.

(6)

Treatment of rental to employer

(d)

Use as residence

(1)

In general

For purposes of this section, a taxpayer uses a dwelling unit during the taxable year as a residence if he uses such unit (or portion thereof) for personal purposes for a number of days which exceeds the greater of—

(A)

14 days, or

(B)

10 percent of the number of days during such year for which such unit is rented at a fair rental.

For purposes of subparagraph (B), a unit shall not be treated as rented at a fair rental for any day for which it is used for personal purposes.

(2)

Personal use of unit

For purposes of this section, the taxpayer shall be deemed to have used a dwelling unit for personal purposes for a day if, for any part of such day, the unit is used—

(A)

for personal purposes by the taxpayer or any other person who has an interest in such unit, or by any member of the family (as defined in section 267(c)(4)) of the taxpayer or such other person;

(B)

by any individual who uses the unit under an arrangement which enables the taxpayer to use some other dwelling unit (whether or not a rental is charged for the use of such other unit); or

(C)

by any individual (other than an employee with respect to whose use section 119 applies), unless for such day the dwelling unit is rented for a rental which, under the facts and circumstances, is fair rental.

The Secretary shall prescribe regulations with respect to the circumstances under which use of the unit for repairs and annual maintenance will not constitute personal use under this paragraph, except that if the taxpayer is engaged in repair and maintenance on a substantially full time basis for any day, such authority shall not allow the Secretary to treat a dwelling unit as being used for personal use by the taxpayer on such day merely because other individuals who are on the premises on such day are not so engaged.

(3)

Rental to family member, etc., for use as principal residence

(A)

In general

(B)

Special rules for rental to person having interest in unit

(i)

Rental must be pursuant to shared equity financing agreement

(ii)

Determination of fair rental

(C)

Shared equity financing agreement

For purposes of this paragraph, the term “shared equity financing agreement” means an agreement under which—

(i)

2 or more persons acquire qualified ownership interests in a dwelling unit, and

(ii)

the person (or persons) holding 1 or more of such interests—

(I)

is entitled to occupy the dwelling unit for use as a principal residence, and

(II)

is required to pay rent to 1 or more other persons holding qualified ownership interests in the dwelling unit.

(D)

Qualified ownership interest

(4)

Rental of principal residence

(A)

In general

(B)

Qualified rental period

For purposes of subparagraph (A), the term “qualified rental period” means a consecutive period of—

(i)

12 or more months which begins or ends in such taxable year, or

(ii)

less than 12 months which begins in such taxable year and at the end of which such dwelling unit is sold or exchanged, and

for which such unit is rented, or is held for rental, at a fair rental.

(e)

Expenses attributable to rental

(1)

In general

(2)

Exception for deductions otherwise allowable

(f)

Definitions and special rules

(1)

Dwelling unit defined

For purposes of this section—

(A)

In general

(B)

Exception

(2)

Personal use by shareholders of S corporation

(3)

Coordination with section 183

If subsection (a) applies with respect to any dwelling unit (or portion thereof) for the taxable year—

(A)

section 183 (relating to activities not engaged in for profit) shall not apply to such unit (or portion thereof) for such year, but

(B)

such year shall be taken into account as a taxable year for purposes of applying subsection (d) of section 183 (relating to 5-year presumption).

(4)

Coordination with section 162(a)(2)

(g)

Special rule for certain rental use

Notwithstanding any other provision of this section or section 183, if a dwelling unit is used during the taxable year by the taxpayer as a residence and such dwelling unit is actually rented for less than 15 days during the taxable year, then—

(1)

no deduction otherwise allowable under this chapter because of the rental use of such dwelling unit shall be allowed, and

(2)

the income derived from such use for the taxable year shall not be included in the gross income of such taxpayer under section 61.

(Added Pub. L. 94–455, title VI, § 601(a), Oct. 4, 1976, 90 Stat. 1569; amended Pub. L. 95–30, title III, § 306(a), (b), May 23, 1977, 91 Stat. 152, 153; Pub. L. 95–600, title VII, § 701(h)(1), Nov. 6, 1978, 92 Stat. 2904; Pub. L. 97–119, title I, § 113(a)–(d), Dec. 29, 1981, 95 Stat. 1641, 1642; Pub. L. 97–216, title II, § 215(b), July 18, 1982, 96 Stat. 194; Pub. L. 97–354, § 5(a)(26), Oct. 19, 1982, 96 Stat. 1694; Pub. L. 99–514, title I, § 143(b), (c), Oct. 22, 1986, 100 Stat. 2120; Pub. L. 100–647, title I, § 1001(h)(1), (2), Nov. 10, 1988, 102 Stat. 3352; Pub. L. 104–188, title I, §§ 1113(a), 1704(t)(39), Aug. 20, 1996, 110 Stat. 1759, 1889; Pub. L. 105–34, title III, § 312(d)(1), title IX, § 932(a), Aug. 5, 1997, 111 Stat. 839, 881.)

cite as: 26 USC 280A