A vacation home
can give you relaxation and some tax breaks
July 2004
If you own or are thinking of acquiring a
vacation home, you may be able to enjoy some tax benefits along with
some relaxing days.
The IRS rules on vacation homes are
complex, but here’s a quick overview. If you rent out the property when
you’re not using it, you have to pay attention to the number of days you
rent the property, the number of days you personally use the property,
and your personal tax situation.
If you rent for 14 days or less, all the
rental income is tax-free; you don’t even have to report the income.
If you rent for more than 14 days, all
rental income must be reported. Whether you report 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 you sell the home.
Note, too, that boats and motor homes
equipped with sleeping, eating, and bathroom facilities can also qualify
as “vacation homes.”
Please call us for details on how to use a
vacation home to your best tax advantage.
Return to 2004 Tax Tips
