Overview
Section 280A of the U.S. Internal Revenue Code governs the deductibility of expenses related to the business or rental use of a home or vacation property. It generally disallows deductions except under specified exceptions and contains detailed requirements and limitations for various types of property use.
General Disallowance and Basic Exception
- No deduction for expenses related to a dwelling unit used as a residence by the taxpayer is allowed, except as provided in this section.
- The rule does not disallow deductions for interest, taxes, and casualty losses unrelated to business use.
Exceptions for Business, Rental, and Day Care Use
- Deductions are allowed for the portion of a home exclusively and regularly used as a principal place of business, for meeting clients, or for business storage if it is the sole fixed location.
- Rental use allows deductions for the portion of a dwelling unit rented, subject to allocation rules.
- Deductions are permitted for portions of a home used in providing licensed day care services, with prorating required if not used exclusively for such.
- Deductions for mixed use (business/rental/day care) cannot exceed gross income from that use minus other allowable deductions.
- Rental to employer by an employee does not qualify for business use deductions.
Definition and Limitations Concerning Personal Use
- A unit is used as a residence if personal use exceeds 14 days or 10% of rental days at fair rental.
- Personal use includes use by the taxpayer, family, or others under swap arrangements.
- Rental at fair rental to a non-family member for use as a principal residence is not considered personal use.
- Qualified rental periods are defined for application of deduction limits.
- Expenses must be allocated between personal and rental days.
Special Rules and Coordination with Other Sections
- S corporations apply "personal use" rules to shareholders.
- Section 183 (hobby loss) does not apply where Section 280A denies deductions.
- Section 162(a)(2) (deductions for business travel) remains allowable and unaffected.
- If a residence is rented for under 15 days in a year, rental income is not taxable and no related deductions are allowed.
Definitions
- "Dwelling unit" includes houses, apartments, condos, mobile homes, boats, and related structures, except for units operating exclusively as hotels or similar establishments.
Key Dates / Deadlines
- Amendments and effective dates are specified for changes enacted in 1977, 1978, 1981, 1986, 1988, 1996, and 1997, with most changes effective for taxable years after certain dates as outlined in statutory notes.