Vacationers have recently been eschewing traditional hotels for beachfront community houses, secluded cabins far away from the daily grind of bustling cities and Airbnb lodging.
This has presented an opportunity for many home owners and owners of vacation properties with an opportunity to get their own slice of the rental income market.
Getting into the rental business, however, also means navigating complex IRS rules. If you’re currently renting your vacation home or room out for only a limited time over the course of a year, however, Uncle Sam has a great tax break available:
- Rent for 14 days or less and a simple tax break is available. If you rent your vacation home for 14 days or less, all of the rental income is tax-free! This attractive tax benefit can help provide cash for your mortgage and other expenses.
- Rent for more than 14 days and your tax planning and personal life become more complex. If you rent your vacation home for more than 14 days, all your rental income is reportable. Whether you treat the income and expenses as a second residence or as rental property depends on the personal use of your vacation home relative to the time the home is rented out. This test is made annually and determines the nature of deductions, loss carryovers, and the tax treatment if the vacation home is sold.
To guide you through the IRS rules to find the rental strategy that meets your financial goals yet ensures the personal enjoyment of your vacation home, please call!