Save Your Vacation Home Tax Deductions

With some careful planning and a little discipline you can enjoy a vacation home and cut your taxes too. As you plan the use of your vacation home, a word of caution is in order, as the IRS rules can be potentially restrictive and complex.

 

Although renting out your vacation home may or may not make sense for you, many vacation home owners do rent out their property when they are not using it themselves. The principal variables are the number of personal use, your individual tax situation, the number of days that your rent the property to others 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, loss carryovers, and the tax treatment if the vacation home is sold.

 

Our tax advisors can guide you through the IRS rules and assist you with a rental strategy that ensures the personal enjoyment of your vacation home while meeting your financial goals. If you need assistance contact our office at (260) 497-9761 to schedule an appointment.