Focus on: Taxes

How would you like a way to take money out of your company and not have to pay a single dime in taxes on that money? And yet at the same time the company would get a tax deduction for 100 percent of the amount.

Alternatively, how about a way to reward key employees so that they receive the money completely tax free no reporting anything, and your business still gets to deduct the expense? You see, the code has a provision 280A(g) with which most tax advisors aren't all that familiar.

Or maybe for some reason they don't think it's worth bothering with.

To translate the section into everyday English, this section of the tax code says that so long as you rent out your home for 14 days or less, the income will not be taxable.

In order to let you see how powerful this really is, let me share with you a couple of examples.

It's the start of the year, and you decide that you want to make sure that everybody at your business is committed to giving their 100 percent and working cooperatively.

To that end you decide to have a two-day corporate retreat at your house.

Before you decided to use your house, you had called around to a couple of different hotels and asked them how much they would charge to provide a fully catered meeting room for 10 hours a day, along with some comfortable furnishings.

The average price quoted was about $500 a day.

Since that is the going rate for such facilities, you feel that it is only fair for you personally to charge your company a similar amount.

Thus the bill you present to the company is $1,000 for the two-day retreat.

Due to section 280A, you get to pocket 100 percent of that $1,000 without paying a single dime in taxes.

No income taxes, employment taxes, or even workman's comp is owed on that $1,000.

It all belongs to you.

And at the same time, your company is able to fully deduct the $1,000 as a rental deduction.

Talk about double dipping! Now, it might so happen that you have the type of office where everybody may get the message for a month or two, but after a while things start to revert back to where they were before the training.

Therefore it might be in the company's best interest to have these executive retreats about every other month.

That comes out to be about 12 days out of the year, or $6,000 tax-free dollars into your pocket.

Ooops! Almost forgot about holiday parties.

Generally a side result of these informal executive treats is a closer knit crew who aren't going to be happy with just one office party a year.

It's going to take at least two to make them happy.

That gives another $1,000 tax-free to you.

Lest your CPA start to think that you are some sort of cold-hearted boss who uses the employees' time for personal gain, lets change the facts a little bit.

Let's say that you had some key employees who you would really like to bonus to let them know you really appreciated them.

But you knew that any bonus was going to be eaten alive in taxes.

Have any idea of what I'm thinking? Yep, move the party to their house a few months.

In fact, nothing in the tax code says that your business can only deduct these expenses for 14 days of rental use.

Rather, the 14-day limitation is per taxpayer whose house is being rented.

That means that if there was a valid business purpose, you could have the executive retreats at your house for 10 days out of the year $5,000 to you.

Ten days at Sally's house $5,000 to Sally.

And 10 days at Phil's house $5,000 to Phil.

All tax-free and yet deductible.

Who says tax planning has to be boring? Tim Berry is manager of The Tax Academy in Reno.