Tax Implications of Renting Out Your Vacation Home
Many people might not know that if you rent out your vacation home for 15 days or more, you must report the income on your tax returns. Determining how this impacts your tax liability and what expenses are eligible to be deducted related to a vacation home can get tricky.
The expenses you can deduct depend on whether the home is classified as a rental property for tax purposes, based on the amount of personal vs. rental use. Adjusting your personal use — or the number of days you rent it out — might allow the home to be classified in a more beneficial way.
With a rental property, you can deduct rental expenses, including losses, subject to the real estate activity rules. You can’t deduct any interest that’s attributable to your personal use of the home, but you can take the personal portion of property tax as an itemized deduction.
With a non-rental property, you can deduct rental expenses only to the extent of your rental income. Any excess can be carried forward to offset rental income in future years. You also can take an itemized deduction for the personal portion of both mortgage interest and property taxes.