As we start to open back up this spring and summer, it is a good time to talk about your vacation home rental. It was a bad year for travel in 2020, so I am sure there will be a lot of activity this summer.
In the old days, rental of your personal residence was mainly done for properties on a nice lake, a warm climate, or a resort area. Now with Airbnb people everywhere are renting out their homes. These rentals can last hours, days or weeks.
So today we are not talking about long-term rentals – we are talking short-term rentals – right?
- Yes, this would typically be rentals of your personal residence or vacation homes.
When is a home considered to be a personal residence or vacation home rental?
- Used personally for the greater of 14 days or 10% of the total rented days.
- If you rent it for 200 days, then you can use it for 20 days before it is considered to be a personal residence or vacation home rental.
- If a personal residence or vacation home, then expenses have to be allocated based on days rented.
How are rented days calculated?
- Rented at fair market value
- Not used by family members or anyone else for free
How many days can you rent your home for income?
- As many as you want.
- If it is less than 15 days did not know that you do not need to claim the income?
- If you rent it for 15 days or more you need to claim the income on your return.
What kind of expenses can be taken?
- Ordinary and necessary expenses
- Prorated based on rental days vs personal days.
- Empty days and days there to repair property does not count.
- Used 30 days- rented 60 days = 66% deduction
These types of rental can actually be more complex than a person might think, so it is a good idea to talk to a tax professional to make sure you are doing it right.