Internal Revenue Code:Sec. 280A. Disallowance of certain expenses in connection with business use of home, rental of vacation homes, etc
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Location in Internal Revenue Code
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART IX - ITEMS NOT DEDUCTIBLE
Statute
Sec. 280A. Disallowance of certain expenses in connection with
business use of home, rental of vacation homes, etc.
(a) General rule
Except as otherwise provided in this section, in the case of a
taxpayer who is an individual or an S corporation, no deduction
otherwise allowable under this chapter shall be allowed with
respect to the use of a dwelling unit which is used by the taxpayer
during the taxable year as a residence.
(b) Exception for interest, taxes, casualty losses, etc.
Subsection (a) shall not apply to any deduction allowable to the
taxpayer without regard to its connection with his trade or
business (or with his income-producing activity).
(c) Exceptions for certain business or rental use; limitation on
deductions for such use
(1) Certain business use
Subsection (a) shall not apply to any item to the extent such
item is allocable to a portion of the dwelling unit which is
exclusively used on a regular basis -
(A) as the principal place of business for any trade or
business of the taxpayer,
(B) as a place of business which is used by patients,
clients, or customers in meeting or dealing with the taxpayer
in the normal course of his trade or business, or
(C) in the case of a separate structure which is not attached
to the dwelling unit, in connection with the taxpayer's trade
or business.
In the case of an employee, the preceding sentence shall apply
only if the exclusive use referred to in the preceding sentence
is for the convenience of his employer. For purposes of
subparagraph (A), the term ''principal place of business''
includes a place of business which is used by the taxpayer for
the administrative or management activities of any trade or
business of the taxpayer if there is no other fixed location of
such trade or business where the taxpayer conducts substantial
administrative or management activities of such trade or
business.
(2) Certain storage use
Subsection (a) shall not apply to any item to the extent such
item is allocable to space within the dwelling unit which is used
on a regular basis as a storage unit for the inventory or product
samples of the taxpayer held for use in the taxpayer's trade or
business of selling products at retail or wholesale, but only if
the dwelling unit is the sole fixed location of such trade or
business.
(3) Rental use
Subsection (a) shall not apply to any item which is
attributable to the rental of the dwelling unit or portion
thereof (determined after the application of subsection (e)).
(4) Use in providing day care services
(A) In general
Subsection (a) shall not apply to any item to the extent that
such item is allocable to the use of any portion of the
dwelling unit on a regular basis in the taxpayer's trade or
business of providing day care for children, for individuals
who have attained age 65, or for individuals who are physically
or mentally incapable of caring for themselves.
(B) Licensing, etc., requirement
Subparagraph (A) shall apply to items accruing for a period
only if the owner or operator of the trade or business referred
to in subparagraph (A) -
(i) has applied for (and such application has not been
rejected),
(ii) has been granted (and such granting has not been
revoked), or
(iii) is exempt from having,
a license, certification, registration, or approval as a day
care center or as a family or group day care home under the
provisions of any applicable State law. This subparagraph
shall apply only to items accruing in periods beginning on or
after the first day of the first month which begins more than
90 days after the date of the enactment of the Tax Reduction
and Simplification Act of 1977.
(C) Allocation formula
If a portion of the taxpayer's dwelling unit used for the
purposes described in subparagraph (A) is not used exclusively
for those purposes, the amount of the expenses attributable to
that portion shall not exceed an amount which bears the same
ratio to the total amount of the items allocable to such
portion as the number of hours the portion is used for such
purposes bears to the number of hours the portion is available
for use.
(5) Limitation on deductions
In the case of a use described in paragraph (1), (2), or (4),
and in the case of a use described in paragraph (3) where the
dwelling unit is used by the taxpayer during the taxable year as
a residence, the deductions allowed under this chapter for the
taxable year by reason of being attributed to such use shall not
exceed the excess of -
(A) the gross income derived from such use for the taxable
year, over
(B) the sum of -
(i) the deductions allocable to such use which are
allowable under this chapter for the taxable year whether or
not such unit (or portion thereof) was so used, and
(ii) the deductions allocable to the trade or business (or
rental activity) in which such use occurs (but which are not
allocable to such use) for such taxable year.
Any amount not allowable as a deduction under this chapter by
reason of the preceding sentence shall be taken into account as a
deduction (allocable to such use) under this chapter for the
succeeding taxable year. Any amount taken into account for any
taxable year under the preceding sentence shall be subject to the
limitation of the 1st sentence of this paragraph whether or not
the dwelling unit is used as a residence during such taxable
year.
(6) Treatment of rental to employer
Paragraphs (1) and (3) shall not apply to any item which is
attributable to the rental of the dwelling unit (or any portion
thereof) by the taxpayer to his employer during any period in
which the taxpayer uses the dwelling unit (or portion) in
performing services as an employee of the employer.
(d) Use as residence
(1) In general
For purposes of this section, a taxpayer uses a dwelling unit
during the taxable year as a residence if he uses such unit (or
portion thereof) for personal purposes for a number of days which
exceeds the greater of -
(A) 14 days, or
(B) 10 percent of the number of days during such year for
which such unit is rented at a fair rental.
For purposes of subparagraph (B), a unit shall not be treated as
rented at a fair rental for any day for which it is used for
personal purposes.
(2) Personal use of unit
For purposes of this section, the taxpayer shall be deemed to
have used a dwelling unit for personal purposes for a day if, for
any part of such day, the unit is used -
(A) for personal purposes by the taxpayer or any other person
who has an interest in such unit, or by any member of the
family (as defined in section 267(c)(4)) of the taxpayer or
such other person;
(B) by any individual who uses the unit under an arrangement
which enables the taxpayer to use some other dwelling unit
(whether or not a rental is charged for the use of such other
unit); or
(C) by any individual (other than an employee with respect to
whose use section 119 applies), unless for such day the
dwelling unit is rented for a rental which, under the facts and
circumstances, is fair rental.
The Secretary shall prescribe regulations with respect to the
circumstances under which use of the unit for repairs and annual
maintenance will not constitute personal use under this
paragraph, except that if the taxpayer is engaged in repair and
maintenance on a substantially full time basis for any day, such
authority shall not allow the Secretary to treat a dwelling unit
as being used for personal use by the taxpayer on such day merely
because other individuals who are on the premises on such day are
not so engaged.
(3) Rental to family member, etc., for use as principal residence
(A) In general
A taxpayer shall not be treated as using a dwelling unit for
personal purposes by reason of a rental arrangement for any
period if for such period such dwelling unit is rented, at a
fair rental, to any person for use as such person's principal
residence.
(B) Special rules for rental to person having interest in unit
(i) Rental must be pursuant to shared equity financing
agreement
Subparagraph (A) shall apply to a rental to a person who
has an interest in the dwelling unit only if such rental is
pursuant to a shared equity financing agreement.
(ii) Determination of fair rental
In the case of a rental pursuant to a shared equity
financing agreement, fair rental shall be determined as of
the time the agreement is entered into and by taking into
account the occupant's qualified ownership interest.
(C) Shared equity financing agreement
For purposes of this paragraph, the term ''shared equity
financing agreement'' means an agreement under which -
(i) 2 or more persons acquire qualified ownership interests
in a dwelling unit, and
(ii) the person (or persons) holding 1 or more of such
interests -
(I) is entitled to occupy the dwelling unit for use as a
principal residence, and
(II) is required to pay rent to 1 or more other persons
holding qualified ownership interests in the dwelling unit.
(D) Qualified ownership interest
For purposes of this paragraph, the term ''qualified
ownership interest'' means an undivided interest for more than
50 years in the entire dwelling unit and appurtenant land being
acquired in the transaction to which the shared equity
financing agreement relates.
(4) Rental of principal residence
(A) In general
For purposes of applying subsection (c)(5) to deductions
allocable to a qualified rental period, a taxpayer shall not be
considered to have used a dwelling unit for personal purposes
for any day during the taxable year which occurs before or
after a qualified rental period described in subparagraph
(B)(i), or before a qualified rental period described in
subparagraph (B)(ii), if with respect to such day such unit
constitutes the principal residence (within the meaning of
section 121) of the taxpayer.
(B) Qualified rental period
For purposes of subparagraph (A), the term ''qualified rental
period'' means a consecutive period of -
(i) 12 or more months which begins or ends in such taxable
year, or
(ii) less than 12 months which begins in such taxable year
and at the end of which such dwelling unit is sold or
exchanged, and
for which such unit is rented, or is held for rental, at a fair
rental.
(e) Expenses attributable to rental
(1) In general
In any case where a taxpayer who is an individual or an S
corporation uses a dwelling unit for personal purposes on any day
during the taxable year (whether or not he is treated under this
section as using such unit as a residence), the amount deductible
under this chapter with respect to expenses attributable to the
rental of the unit (or portion thereof) for the taxable year
shall not exceed an amount which bears the same relationship to
such expenses as the number of days during each year that the
unit (or portion thereof) is rented at a fair rental bears to the
total number of days during such year that the unit (or portion
thereof) is used.
(2) Exception for deductions otherwise allowable
This subsection shall not apply with respect to deductions
which would be allowable under this chapter for the taxable year
whether or not such unit (or portion thereof) was rented.
(f) Definitions and special rules
(1) Dwelling unit defined
For purposes of this section -
(A) In general
The term ''dwelling unit'' includes a house, apartment,
condominium, mobile home, boat, or similar property, and all
structures or other property appurtenant to such dwelling unit.
(B) Exception
The term ''dwelling unit'' does not include that portion of a
unit which is used exclusively as a hotel, motel, inn, or
similar establishment.
(2) Personal use by shareholders of S corporation
In the case of an S corporation, subparagraphs (A) and (B) of
subsection (d)(2) shall be applied by substituting ''any
shareholder of the S corporation'' for ''the taxpayer'' each
place it appears.
(3) Coordination with section 183
If subsection (a) applies with respect to any dwelling unit (or
portion thereof) for the taxable year -
(A) section 183 (relating to activities not engaged in for
profit) shall not apply to such unit (or portion thereof) for
such year, but
(B) such year shall be taken into account as a taxable year
for purposes of applying subsection (d) of section 183
(relating to 5-year presumption).
(4) Coordination with section 162(a)(2)
Nothing in this section shall be construed to disallow any
deduction allowable under section 162(a)(2) (or any deduction
which meets the tests of section 162(a)(2) but is allowable under
another provision of this title) by reason of the taxpayer's
being away from home in the pursuit of a trade or business (other
than the trade or business of renting dwelling units).
(g) Special rule for certain rental use
Notwithstanding any other provision of this section or section
183, if a dwelling unit is used during the taxable year by the
taxpayer as a residence and such dwelling unit is actually rented
for less than 15 days during the taxable year, then -
(1) no deduction otherwise allowable under this chapter because
of the rental use of such dwelling unit shall be allowed, and
(2) the income derived from such use for the taxable year shall
not be included in the gross income of such taxpayer under
section 61.
Sources
(Added Pub. L. 94-455, title VI, Sec. 601(a), Oct. 4, 1976, 90
Stat. 1569; amended Pub. L. 95-30, title III, Sec. 306(a), (b), May
23, 1977, 91 Stat. 152, 153; Pub. L. 95-600, title VII, Sec.
701(h)(1), Nov. 6, 1978, 92 Stat. 2904; Pub. L. 97-119, title I,
Sec. 113(a)-(d), Dec. 29, 1981, 95 Stat. 1641, 1642; Pub. L.
97-216, title II, Sec. 215(b), July 18, 1982, 96 Stat. 194; Pub. L.
97-354, Sec. 5(a)(26), Oct. 19, 1982, 96 Stat. 1694; Pub. L.
99-514, title I, Sec. 143(b), (c), Oct. 22, 1986, 100 Stat. 2120;
Pub. L. 100-647, title I, Sec. 1001(h)(1), (2), Nov. 10, 1988, 102
Stat. 3352; Pub. L. 104-188, title I, Sec. 1113(a), 1704(t)(39),
Aug. 20, 1996, 110 Stat. 1759, 1889; Pub. L. 105-34, title III,
Sec. 312(d)(1), title IX, Sec. 932(a), Aug. 5, 1997, 111 Stat. 839,
881.)
References in Text
REFERENCES IN TEXT
The date of enactment of the Tax Reduction and Simplification Act
of 1977, referred to in subsec. (c)(4)(B), is the date of enactment
of Pub. L. 95-30, 91 Stat. 126, which was May 23, 1977.
Miscellaneous
AMENDMENTS
1997 - Subsec. (c)(1). Pub. L. 105-34, Sec. 932(a), inserted at
end ''For purposes of subparagraph (A), the term 'principal place
of business' includes a place of business which is used by the
taxpayer for the administrative or management activities of any
trade or business of the taxpayer if there is no other fixed
location of such trade or business where the taxpayer conducts
substantial administrative or management activities of such trade
or business.''
Subsec. (d)(4)(A). Pub. L. 105-34, Sec. 312(d)(1), substituted
''section 121'' for ''section 1034''.
1996 - Subsec. (c)(1)(A). Pub. L. 104-188, Sec. 1704(t)(39),
amended subpar. (A) generally. Prior to amendment, subpar. (A)
read as follows: ''the principal place of business for any trade or
business of the taxpayer.''
Subsec. (c)(2). Pub. L. 104-188, Sec. 1113(a), substituted
''inventory or product samples'' for ''inventory''.
1988 - Subsec. (c)(5). Pub. L. 100-647 inserted ''(or rental
activity)'' after ''trade or business'' in subpar. (B)(ii) and
inserted at end ''Any amount taken into account for any taxable
year under the preceding sentence shall be subject to the
limitation of the 1st sentence of this paragraph whether or not the
dwelling unit is used as a residence during such taxable year.''
1986 - Subsec. (c)(5)(B). Pub. L. 99-514, Sec. 143(c), added
subpar. (B) and struck out former subpar. (B) which read as
follows: ''the deductions allocable to such use which are allowable
under this chapter for the taxable year whether or not such unit
(or portion thereof) was so used.''
Subsec. (c)(6). Pub. L. 99-514, Sec. 143(b), added par. (6).
1982 - Subsecs. (a), (e)(1). Pub. L. 97-354, Sec. 5(a)(26)(A),
(B), substituted ''an S corporation'' for ''an electing small
business corporation''.
Subsec. (f)(2). Pub. L. 97-354, Sec. 5(a)(26)(C), substituted
''shareholders of S corporation'' for ''electing small business
corporation'' in subsec. heading, substituted ''an S corporation''
for ''an electing small business corporation'' and ''any
shareholder of the S corporation'' for ''any shareholder of the
electing small business corporation''.
Subsec. (f)(4). Pub. L. 97-216 struck out '', etc.'' after
''section 162(a)(2)'' in heading, struck out ''(A) In general. - ''
before ''Nothing in this section'', and struck out subpar. (B)
which directed the Secretary to prescribe amounts deductible
(without substantiation) pursuant to last sentence of section
162(a) and that no other provisions of this title could permit such
a deduction for any taxable year of amounts in excess of the
amounts determined to be appropriate under the circumstances.
1981 - Subsec. (c)(1)(A). Pub. L. 97-119, Sec. 113(c),
substituted ''the principal place of business for any trade or
business of the taxpayer'' for ''as the taxpayer's principal place
of business''.
Subsec. (d)(2). Pub. L. 97-119, Sec. 113(d), inserted in
provision following subpar. (C) '', except that if the taxpayer is
engaged in repair and maintenance on a substantially full time
basis for any day, such authority shall not allow the Secretary to
treat a dwelling unit as being used for personal use by the
taxpayer on such day merely because other individuals who are on
the premises on such day are not so engaged''.
Subsec. (d)(3), (4). Pub. L. 97-119, Sec. 113(a), added par. (3),
redesignated former par. (3) as (4) and struck out ''to a person
other than a member of the family (as defined in section 267(c)(4))
of the taxpayer'' after ''such unit is rented'' in subpar. (B).
Subsec. (f)(4). Pub. L. 97-119, Sec. 113(b)(1), added par. (4).
1978 - Subsec. (d)(3). Pub. L. 95-600 added par. (3).
1977 - Subsec. (c)(4), (5). Pub. L. 95-30 added par. (4),
redesignated former par. (4) as (5) and substituted ''paragraph
(1), (2), or (4)'' for ''paragraph (1) or (2)'' in introductory
provisions.
EFFECTIVE DATE OF 1997 AMENDMENT
Amendment by section 312(d)(1) of Pub. L. 105-34 applicable to
sales and exchanges after May 6, 1997, with certain exceptions, see
section 312(d) of Pub. L. 105-34, set out as a note under section
121 of this title.
Section 932(b) of Pub. L. 105-34 provided that: ''The amendment
made by subsection (a) (amending this section) shall apply to
taxable years beginning after December 31, 1998.''
EFFECTIVE DATE OF 1996 AMENDMENT
Section 1113(b) of Pub. L. 104-188 provided that: ''The amendment
made by subsection (a) (amending this section) shall apply to
taxable years beginning after December 31, 1995.''
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by Pub. L. 100-647 effective, except as otherwise
provided, as if included in the provision of the Tax Reform Act of
1986, Pub. L. 99-514, to which such amendment relates, see section
1019(a) of Pub. L. 100-647, set out as a note under section 1 of
this title.
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by Pub. L. 99-514 applicable to taxable years beginning
after Dec. 31, 1986, see section 151(a) of Pub. L. 99-514, set out
as a note under section 1 of this title.
EFFECTIVE DATES OF 1982 AMENDMENTS
Amendment by Pub. L. 97-354 applicable to taxable years beginning
after Dec. 31, 1982, see section 6(a) of Pub. L. 97-354, set out as
an Effective Date note under section 1361 of this title.
Amendment by Pub. L. 97-216 applicable to taxable years beginning
after Dec. 31, 1981, see section 215(d) of Pub. L. 97-216, set out
as a note under section 162 of this title.
EFFECTIVE DATE OF 1981 AMENDMENT
Section 113(e) of Pub. L. 97-119 provided that: ''The amendments
made by this section (amending this section) shall apply to taxable
years beginning after December 31, 1975, except that in the case of
taxable years beginning after December 31, 1975, and before January
1, 1980, the amendment made by this section shall apply only to
taxable years for which, on the date of the enactment of this Act
(Dec. 29, 1981), the making of a refund, or the assessment of a
deficiency, was not barred by law or any rule of law.''
EFFECTIVE DATE OF 1978 AMENDMENT
Section 701(h)(2) of Pub. L. 95-600, as amended by Pub. L.
99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: ''The
amendment made by paragraph (1) (amending this section) shall take
effect as if included in section 280A of the Internal Revenue Code
of 1986 (formerly I.R.C. 1954), as such provision was added to such
Code by section 601(a) of the Tax Reform Act of 1976 (Pub. L.
94-455, title VI, Sec. 601(a), Oct. 4, 1976, 90 Stat. 1569).''
EFFECTIVE DATE OF 1977 AMENDMENT
Section 306(c) of Pub. L. 95-30 provided that: ''The amendments
made by this section (amending this section) shall apply to taxable
years beginning after December 31, 1975.''
EFFECTIVE DATE
Section 601(c) of Pub. L. 94-455 provided that: ''The amendments
made by this section (enacting this section and amending the
analysis of sections preceding section 261 of this title) shall
apply to taxable years beginning after December 31, 1975.''
References
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 136, 163, 280F, 469 of
this title.
