From our CPA office in St. Petersburg, FL – The tax rules regarding income received from renting a second home can be complicated, especially if you rent the home for several months of the year and also use the home yourself for part of the year. However, one provision is not complicated, and that is when a taxpayer rents their property for 14 or fewer days. Taxpayer’s renting their vacation home for 14 or fewer days pay no income tax on their rental income. They essentially pocket the money tax-free.
However, income from the rental of a vacation home for 15 days or longer must be reported as taxable income. Expenses related to the rental property are also reported to offset any rental income received. A vacation home is not limited to a house, but also includes apartments, condominiums, mobile homes, and boats.
Also, the IRS considers a vacation home a personal residence if personal use exceeds the greater of 15 days or 10 percent of the total days rented to others. When a taxpayer uses a vacation home as a residence and also rents it to others, expenses must be divided between rental use and personal use. The rental portion of the expenses can be deducted up to the amount of rental income. The personal percentage of mortgage interest and property taxes are deductible on Schedule A.
The 14 day exception discussed above, can also apply to taxpayers who rent their primary residence. Homeowners who live close to vacation destinations such as the beach or mountains may be able to make some extra cash by renting out their personal residence when they go on vacation, as long as it’s two weeks or less. Although taxpayers cannot take depreciation or deduct maintenance expenses, they can still deduct the mortgage interest and property taxes on Schedule A. This 14 day rule can also be used by taxpayers that rent their homes for movie productions, Super Bowls, political conventions or other short term events.
If you have questions regarding the rental of your vacation (or primary) home, call us today. As tax professionals, McAtee & Associates can help both individual and business taxpayers with all their tax matters.
ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.
