Planning a vacation this summer but don't know how to finance it? Consider renting out your personal residence while you are away and pocketing the rental income tax-free!

An interesting tax break in the Internal Revenue Code provides that if a person rents out his or her personal residence for up to 14 days, the rental income is tax free and does not need to be reported on the his or her tax return. This tax break is not limited to a certain amount of income, so no matter how much income you earn during this short-term rental period, it will be tax-free as long as all other requirements are met.   

There are a few limits on using this unique tax-break. For example, the tax break can only be taken once per year, and it cannot be taken at all if the home is rented out for longer than 14 days. Further, although you are using your personal residence for rental purposes if you take advantage of this tax break, tax deductions for depreciation and operating costs are not available. On the other hand, you can still deduct expenses for property taxes and mortgage interest as normally allowed.

This tax perk is sometimes called the "Masters Provision" because so many homeowners rent out their residences in Augusta, Georgia during the Masters golf tournament to pocket some extra, tax-free cash. This is a similarly great option for Michigan residents who own cottages, lake houses, or homes near summer concert festivals and other events that attract visitors.