Leasing out a piece of property can be an excellent way to make a little extra money throughout the year. Indeed, if you have a long-term tenant in place, you can end up with hundreds or even thousands of extra dollars going into your bank account each month.
Unfortunately, however, when you generate income through long-term rentals such as this, the IRS will eventually want their slice of the pie. Of course, you can usually work with your accountant to deduct expenses such as repairs and maintenance to reduce your tax liability, but you will eventually need to pay what's owed.
Though there is little that you can do to escape the IRS when leasing on a long-term basis, things can be very different if you rent out your property for just a few days a year. Tax legislation, known to real estate CPAs across the country as the "Augusta Rule," allows you to possibly exclude up to 14 days of rental income from your taxes each year. In other words, you may be able to rent out your home without needing to pay taxes on the money earned.