The holidays are a great time to get away to a vacation home. Escape the crowds of the summer and have a truly relaxing holiday getaway. If you own a vacation home, you probably know that you need to report rental income, but here are 7 tax tips Forbes published that you won’t want to miss.
- The Definition of a Vacation Home — First, realize that a vacation home can be an apartment, condo, mobile home, boat or other type of property. A vacation home isn’t limited to single-family houses.
- How to Report Rental Income — Most rental income is reported on Schedule E, but it may also be subject to Net Investment Income Tax.
- Personal Use — If you use your vacation home personally as well as rent it to others, you’re required to divide your expenses between the rental use and the personal use.
- Definition of Personal Use — Personal use is defined as use by either you or your family, or any other owner and his or her family, as well as use by anyone paying less than a “fair” rental price (such as friends who receive a steep discount).
- Exclusive Use as a Vacation Home — If you live in the home on any regular basis, your rental expense deduction is limited. Your deduction for rental expenses can’t be more than the rent you received.
- When to Use Schedule A — You can report deductible expenses for personal use on Schedule A, Itemized Deductions: mortgage interest, property taxes and casualty losses.
- When You Don’t Have to Report Income — If you rented your vacation home less than 15 days during the year, and you live in the home on a regular basis, you don’t need to report the rental income.
If you have other questions about renting residential or vacation property, take a look at this IRS resource, or feel free to give me a call and we’ll schedule a time to talk.
And if you’re headed out to your vacation home for the holidays, enjoy your time there!