Tax Rules for Renting Out Your Vacation Home

1. If a vacation property is rented for less than 15 days during the year, any rent received is not included in the owner’s income for tax purposes.
2. If a vacation property is rented for more than 14 days, the owner must include the rent received in their income and can deduct part of their operating expenses and depreciation.
3. Expenses must be allocated between personal use days and rental days, and deductions are subject to specific rules.
4. If rental income exceeds allocable deductions, the owner must report the rent and deductions to determine the amount of rental income to add to their other income.
5. If expenses exceed income, the owner may be able to claim a rental loss, depending on how many days the property is used personally. – Personal use of the rental property for more than 14 days or 10% of the rental days disqualifies claiming loss
– Deductions can be used to offset rental income, but cannot create a loss if personal use is excessive
– Unused deductions can be carried forward for future use
– If deductions exceed rental income and personal use is within limits, a loss can be claimed
– However, the loss may be limited under passive loss rules
– Expenses must be allocated between personal and rental portions
– Rules are complex and individuals should consult a tax professional for guidance

The Tax Rules of Renting Out a Vacation Property