If you own a house that you use as a vacation rental but also use the property yourself at times, you should know some important federal income tax rules. Here’s our guide.
The number of days is key.
The IRS treats situations differently depending on the number of days spent renting and using the property personally. Briefly put, the determinative questions are: Did you rent out the property for 14 or more days in the year? And did you use it personally for more than 14 days?
- Suppose you rent out your house for more than 14 days in the tax year and use the property for personal reasons the greater of 15 or more days or 10 percent or more of the number of rental days. In that case, you must report the rental receipts as income, and you can write off your expenses only for the days the house was rented, not for personal use days. Also, you cannot deduct losses.
- If you rent your house for more than 14 days and use it for personal purposes for 14 or fewer days, or 10 percent or fewer of the rental days, you must report the rental income but can fully deduct expenses and may be able to write off as much as $25,000 in losses.
- If you rent your house for 14 or fewer days per year, you do not have to report the rental receipts as income. Your mortgage interest and property taxes are deductible because, in the eyes of the IRS, the house is your personal residence.
Days spent living in your vacation rental to maintain the property do not count as personal use days. Many owners of vacation rental houses do maintenance work while staying there to limit the time the IRS considers personal use days.
Related – Making Money on a Vacation Rental
