If you rent a home to others, you usually must report the rental income on your tax return. But you may not have to report the income if the rental period is short and you also use the property as your home. In most cases, you can deduct the costs of renting your property. However, your deduction may be limited if you also use the property as your home.
Here is some basic tax information that you should know if you rent out a vacation home:
- Vacation Home. A vacation home can be a house, apartment, condominium, mobile home, boat or similar property.
- Schedule E. You usually report rental income and rental expenses on Schedule E, Supplemental Income and Loss. Your rental income may also be subject to Net Investment Income Tax.
- Used as a Home. If the property is “used as a home,” your rental expense deduction is limited. This means your deduction for rental expenses can’t be more than the rent you received. For more about these rules, see Publication 527.
- Divide Expenses. If you personally use your property and also rent it to others, special rules apply. You must divide your expenses between the rental use and the personal use. To figure how to divide your costs, you must compare the number of days for each type of use with the total days of use.
- Personal Use. Personal use may include use by your family. It may also include use by any other property owners or their family. Use by anyone who pays less than a fair rental price is also personal use.
- Schedule A. Report deductible expenses for personal use on Schedule A, Itemized Deductions. These may include costs such as mortgage interest, property taxes and casualty losses.
- Rented Less than 15 Days. If the property is “used as a home” and you rent it out fewer than 15 days per year, you do not have to report the rental income.
Additional IRS Resources:
- Publication 527, Residential Rental Property (Including Rental of Vacation Homes)
- Tax Topic 415 – Renting Residential and Vacation Property
- Rental Income and Expenses – Real Estate Tax Tips
DISCLAIMER: This information is extracted with permission from IRS releases. We are not responsible for the application of this general information to the specific circumstances of a reader unless we have been engaged as the reader’s tax preparer.
ASSISTANCE: If you need help in preparing your income tax returns, Roy & Associates, PC may be able to be of assistance. Our firm and its predecessor firms have been providing tax services to individuals, small businesses and nonprofit organizations in southwestern Pennsylvania since 1942. You may make an appointment with one of our Directors of Audit and Tax Services, all of whom are well-versed in personal income taxation. See the CONTACTS page above. Standard rates and terms for service will apply.