Taxes
IRS Vacation Home Rules & Loss Limitations

John rented out his vacation home for 50 days during the year and personally used it for 10 days. The fair rental price for the property is $200 per day. During the rental period, John earned $10,000 in rental income and incurred $5,000 in rental-related expenses.
Since John rented out the property for more than 14 days and his personal use was less than 14 days, the property is considered a rental property by the IRS. Therefore, he must report the rental income and expenses on Schedule E. Assuming the fair rental price is $200 per day, John’s personal use of 10 days would equal $2,000 (10 days x $200). This amount must be deducted from the total rental income and expenses to calculate the rental income and expenses to be reported on Schedule E.
After accounting for the personal use portion, John’s rental income would be $8,000 ($10,000 – $2,000) and his rental expenses would be $3,000 ($5,000 – $2,000). John can deduct property taxes, mortgage interest, operating expenses, and depreciation on Schedule E. Since his property is not considered a mixed-use property, the vacation home rules do not limit his ability to deduct a loss if his rental expenses exceed his rental income.
However, John should be aware that while the vacation home rules do not limit his loss deduction, the passive loss and at-risk rules might still apply and could limit his ability to deduct the full amount of his rental property losses.
Tax Rules for Mixed-Use Homes</hjson
If you rent out your vacation property for more than 14 days and use it personally for more than 14 days or 10% of the rental days, then your property is considered a mixed-use home by the IRS. Under these circumstances, the vacation home rules apply, and you will be unable to deduct any losses from the rental.
Mixed-use homes are subject to specific tax rules and limitations that do not apply to primarily personal or primarily rental properties. It’s important to carefully track the number of days your property is rented and used personally to ensure proper tax treatment.
Treatment of Income & Expenses
If your vacation property falls under the mixed-use category, you must report all rental income and expenses on Schedule E. However, unlike primarily rental properties, the vacation home rules limit your ability to deduct any losses from the rental activity. This means that if your rental expenses exceed your rental income, those losses cannot be deducted on your tax return.
It’s crucial to understand the tax implications of mixed-use homes and to consult with a tax professional to ensure compliance with IRS regulations.
Last year, Amara rented out a rental property that she also used for personal use.
She rented out the home for 250 days and received $8,000 in rental income. She used the home for 50 days during the year, and her brother Arinze used the home for 65 days during the year. Amara incurred a total of $9,000 in costs associated with operating the home.
Yes, the days you spend fixing the property do count toward your personal use. Any time you spend at the property for personal reasons, including maintenance and repair work, will be considered personal use and will impact the classification of your property as either personal use or mixed-use.
Frequently Asked Questions About Vacation Rental Property Tax Deductions
Do the days I spend fixing property count toward my personal use?
No, any day that you spend repairing and maintaining your property is not counted as a day of personal use.
Can I deduct property taxes in excess of $10,000 for my vacation home?
If you rent out your vacation home for more than 14 days during the year, you need to allocate property tax expenses between the rental and personal use. The personal portion can be deducted on Schedule A but counts toward the $10,000 state and local tax (SALT) limitation. The rental portion of property tax is reported on Schedule E and does not count toward the SALT limitation.
If I rent my property through Airbnb will I receive a 1099-K?
It depends on the amount of rent received. For 2024, a 1099-K should be issued from Airbnb for income received from payment cards or apps if that amount is over $5,000. This is a change from prior year requirements. Note that the IRS has delayed 1099-K changes previously, and we may see continued future delays.
Can I take a charitable deduction for days that I let a charity use my vacation home?
No. Days donated to a charity for the right to use a vacation home do not qualify for a charitable deduction as it is a donation of only a partial interest in the property.
Does the use of my vacation home by family members count toward personal use?
Generally, yes. Rental to a family member is typically considered personal use unless the property is used as the family member’s principal residence and they are paying rent that is fair market value.
Bottom Line
To claim deductions for a vacation rental property, you must follow certain rules depending on the categorization of the property. Keeping track of the number of days the property is used for personal purposes vs rental purposes is essential to claiming deductions properly.
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