Posts Tagged "vacation home"

Consider taxes if you rent out your vacation home

Posted on Jun 14, 2011

Planning to rent out your vacation getaway? When it comes to taking advantage of the tax benefits, timing is an important factor.  Here are two points to remember.  * The fourteen-day-or-ten-percent test. The IRS applies this test to determine if you use your vacation home as a personal residence. If you stay in the home more than 14 days or 10% of the total days it’s rented in a calendar year (whichever is greater), the general rule is you’re using it as your home.  Why does it matter? Because treating a vacation home as your personal residence affects your rental deductions. You’d include all the rent you receive as income on your tax return. But related expenses are generally limited to the amount of that income, meaning you can’t offset other income with a loss. Note that time spent in your vacation home by family members and certain others can count as personal use.  * The less-than-fifteen exception. Rent out your vacation home for less than 15 days during the taxable year, and the income is yours, tax-free. You don’t even have to report it on your return. Just be aware that any expenses related to the rental are nondeductible. If you itemize, you can still deduct qualified mortgage interest and real estate taxes on your vacation home.  Other tax rules, such as passive activity and capital gains reporting, can also impact the decision to rent out your vacation home. Give us a call before you put up that “For Rent” sign. We’ll be happy to review your options under the tax...

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Be tax smart with your vacation home

Posted on Jul 20, 2010

You can enjoy a vacation home and cut your taxes – with some careful planning and a little discipline. The IRS rules can be complex and potentially restrictive, so a word of caution is in order as you plan the use of your vacation home. Owners of vacation homes often rent out the property when they’re not using it themselves. Renting out your vacation home may or may not make sense for you. The principal variables are the number of days you rent the property, the number of days of personal use, your individual tax situation, and your personal wishes for the use of your vacation home. * 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 and the tax treatment if the vacation home is sold. Please call us 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...

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