Number: RS22052
Title: Tax Treatment of Short-Term Residential Rentals  Reform Proposal
Authors: Louis Alan Talley and Pamela J. Jackson, Government and Finance Division 
Abstract: Generally, taxable income has included rental income from real property. However, an exclusion for de minimis1 rental income (from the rental of a taxpayer's residence for a period of less than 15 days per year) was enacted by the Tax Reform Act of 1976, (P.L. 94-455). Since that time, a number of tax reform proposals have called for inclusion of de minimis rental income as taxable income. The most recent proposal was contained in a report prepared by the Joint Committee on Taxation at the behest of Senators Grassley and Baucus. The proposal would cap the currently unlimited exclusion at $2,000 and rental income greater than $2,000 would be included as taxable income. Deductions for operating costs associated with the rental period (and depreciation) would be allowable but would reduced in proportion to the ratio of excludable income to total rental income from the property. The effective date would be for taxable years beginning after the date of enactment.
Pages: 6
Date: April 26, 2006