
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 26USC280A]

 
                     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
 
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.

(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, Secs. 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

    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.


                               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.''

                  Section Referred to in Other Sections

    This section is referred to in sections 136, 163, 280F, 469 of this 
title.
