The Tax Rules of Renting Out a Vacation Property

The Tax Rules of Renting Out a Vacation Property

Many vacation homeowners tend to rent out their homes for part of the summer. If this is your first-year renting, or maybe you’re looking to rent next year, you might not be completely familiar with the tax rules of renting out a vacation property.

The tax treatment varies depending on how many days the property is rented out. Personal use is also taken into consideration when calculating your tax responsibilities. Personal use includes the use of the rental for which the market rate rent is not charged and the use of the rental by relatives (regardless of if the market rate rent is charged or not).

If the property is rented for less than 15 days, the property is not considered rental property. If it is rented for 15 days or more, the rent earned must be reported as income on your tax report. Although, if the property is used for personal use for more than 14 days or more than 10% of the total days you rent it out to others, the property is considered a residence, not a rental property.

Having a rental property that is considered a residence requires that you allocate all expenses, including mortgage interest and real estate taxes, the rental time, and the personal use time. Having a rental property that is considered rental property permits you to deduct operating expenses and depreciation without a reduction for personal use.

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Determining your tax liabilities on a vacation rental property is complex. Contact our experienced Real Estate accountants at The Innovative CPA Group by filling out our contact form.

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