Staying with family and/or friends while on a business trip is allowed if you follow all three of these rules:
Rule 1: Family and friends may rent a room or entire house/apartment for no more than 14 days during a calendar year to earn the rent tax-free.
Rule 2: Family and friends must personally live at the property being rented for more than 14 days.
Rule 3: You must pay a fair market rental rate.
If you pay your family and/or friends more than $600 during a calendar year, you must report the total of the business rents to the IRS. In turn, your family/friends will report this income on their tax return on Schedule E and report this income in the expense section on Schedule E as well with a supporting statement.
Because you take the business deduction for your travel, your family/friends should also charge sales and/or occupancy taxes. Paying these taxes adds proof of the room’s rental.
If you would like to learn more about renting from family/friends, please call Susan at 630.523.5762. For more helpful tips on becoming a highly profitable business owner, check out Highpoint Advisory Services.