Having a picturesque and pristine home can be beneficial in more ways than you may think! Renting out your home for things like weddings, family reunions, parties, or other events can be a great source of income. But if you’ve ever considered renting your home or property out for special events, you probably have a lot of questions. There are a range of considerations to take from a legal standpoint before inviting these guests into your home.
The good news in renting your home out for events is that it isn’t necessarily something that needs to be reported on your taxes. If you rent out your full-time residence for less than 15 days a year, it's considered a 100% tax-free business and the income does NOT need to be claimed on your tax return. While 14 rental days may not seem like a lot, that’s two full weeks of event time that you can profit from. This could offer a large benefit for homeowners in higher tax brackets, so it's definitely something to consider. Should a homeowner rent their property out for more than two weeks a year, they will need to claim the income on their taxes. However, one benefit to that is the ability to write off home improvement projects as a business expense, which creates the perfect opportunity to cross some items off of your to-do list!
To safely rent out your home for a private event, you need to have the appropriate insurance coverage in place. Even in the best maintained homes, an accident could happen. In some cases, your typical homeowners insurance may be enough to cover the liability of renting your home out, including damage and guest coverage. In other cases, you as the homeowner, as well as any vendors that will be working at the event, must take on additional temporary insurance to protect yourself against the event of an accident. Anything from someone falling down your stairs to a slip on an ice patch in your driveway can prompt someone to take legal action against a homeowner, so having protection is an absolute must. Before renting your property, contact your homeowner insurance provider to discuss your current coverage and any gaps that must be bridged to safely rent out your property. Working with an event planning company is also an effective method of figuring out necessary insurance needs for special events.
It’s vital to check your local laws and rules associated with hosting a large-scale event at your home. On a city level, there could be noise ordinance laws, and your homeowner association bylaws should be checked as well for situations like parking a large number of cars.
Create a Contract
Drawing up a contract for your renters to sign is a solid protective measure to hold guests accountable for the duration of their rental. It’s also useful to put into place rules and policies that vendors will have to abide by while working on your property. Informing all parties involved of how they should conduct themselves and ensuring everyone agrees to the terms can help to prevent damage from occurring and make for a smoother rental process overall.
Opening up your home to strangers can potentially put it at risk of damage. Collecting a security deposit in addition to the rental fee can protect you as a homeowner against the cost that comes with damage to your home. After the event is over and you do a walk-through of the property and see that everything is order, you can return the deposit in full to renters. Use your insurance deductible as a guide for how much you should set the deposit amount.
It’s a unique experience to be able to provide renters with the perfect venue for their special event. It’s also an effective way to turn a profit—and in some cases, a profit that has no tax implications! Just be sure to carefully research and adhere to the laws and regulations as needed.