Updated: Oct 17, 2019
Many businesses are structured as some form of legal entity (corporation, S corporation, limited liability company, etc.) which can have meetings wherever they choose - including the home of a shareholder, partner, etc. and generally speaking, you can rent your home (or a room) for 14 days (or fewer) each year tax-free.
So, if you own a business structured in a manner described above, you may consider hosting meetings at your home and charging your company a fair and reasonable rate for the rental of your home. This allows your business to deduct the rental expense and you can exclude the income received personally as allowed under IRC 280A(g).
Sounds too good to be true, right? Well, some conditions do apply.
One, you can't provide "entertainment" at your meeting. That would color your home as an entertainment facility and compromise this strategy. However, there are two exceptions to the entertainment limitation: You can have an employee summer picnic and/or holiday party that involves entertaining and the strategy is still allowed.
Here's an example of how this can work. Jessica owns Jessica's Real Estate, Inc. and operates as an S Corporation. She has a team of 15 agents. Each year Jessica holds ten monthly all-day training sessions for her agents. She has researched competitive bids for these meetings and determined $1,500 is a fair and reasonable expense in her area. Jessica can invoice her company a total of $15,000 for the year and that income is tax-free to her since she is renting her home for 14 days or less.
Jessica's corporation can deduct the $15,000 as well. In effect Jessica spends company money she would have spent anyway... except now she receives the income and not a third-party.
And you can too--as long as you meet IRS guidelines.
First you need to be able to document that the rent you charge is fair and reasonable for your area. Next is the "entertainment issue," which you can be address by making sure your event is a training session.
Document the business activities that took place, maintain a sign-in sheet, and keep copies of your training materials.
Finally, your corporation should issue a 1099 for the total rents paid to you during the year. If you have your taxes prepared, clearly communicate your intentions to your tax preparer and they should know what adjustments to make on your tax return so that you don't pay tax on the income reported on the 1099.