Posts Tagged "Vehicles"

Track use of your vacation home to maximize tax breaks

Posted on Jul 23, 2015

If you own a vacation home (some boats and recreational vehicles also qualify) that you also rent out to others, keep track of who uses it during the year to maximize your tax breaks. Meet the rules and receive tax-free income. If your home is rented for 14 or fewer days during the year, you don’t have to report the income. You can generally deduct mortgage interest and real estate taxes as itemized deductions, but you can’t deduct any other rental expenses. Limit your personal use, and deduct all your rental expenses. If you limit your personal use to not more than 14 days or 10% of the time the home is rented, all rental expenses are deductible. Offset your rental income with your rental expenses. If you use the property for more than 14 days or 10% of the number of days it’s rented, the rules change. Your rental deductions (except for taxes and mortgage interest) are limited to the amount of your rental income. Example: You stayed in your vacation home 20 days last year. It was rented at fair market value for 190 days. In this example, your personal use exceeded the 10% limit (19 days). Your rental deductions are limited to the rental income you received. Convert the property to your residence, and the gain when you sell may be tax-free. If you use your vacation home as your principal residence for two out of the five years before you sell it, you may exclude up to $250,000 of gain ($500,000 for married couples) from your income. However, you will have to pay tax on gain to the extent of certain depreciation previously taken after May 6, 1997. The rules are complex, but a basic understanding of the rules and good recordkeeping will help you get the best tax breaks from your vacation home. Give us a call if you would like more information. Gilliland & Associates, PC is a full-service CPA firm specializing in tax planning for individuals and businesses in the Northern Virginia area. We are based in Falls Church, VA and also service clients in the McLean and Tysons Corner, VA. Gilliland & Associates specializes known for our superior knowledge and aggressive interpretation and application of tax laws, we help you keep more of your earnings by finding you the lowest possible tax on your business or personal tax return. You can connect with us on Google+, LinkedIn, Facebook, and...

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