[{"@context":"http:\/\/schema.org","@type":"Article","mainEntityOfPage":"https:\/\/moneydoneright.com\/taxes\/personal-taxes\/vacation-home-tax-rules\/","datePublished":"2020-03-04","dateModified":"2020-06-03","headline":"Vacation Home Tax Rules: What Deductions Can I Take?","image":"https:\/\/moneydoneright.com\/wp-content\/uploads\/2018\/01\/Vacation-Home-Taxes.png","articleBody":"A client recently asked me about the tax implications of buying a vacation home \u201csomewhere far away from Los Angeles,\u201d renting it out on Airbnb part of the year, and taking a 2-week family vacation there once a year.  I explained to him that the tax code is very granular when it comes to vacation homes.  How many days you use a vacation home for personal\/family use vs. how many days you use it for rental use will dictate how much income you have to report on your tax return as well as how much in deductions you can take against that income.  Let\u2019s walk through the three scenarios a vacation home can fall into for tax purposes based on how many days the home is used personally vs. how many days the home is used as a rental.Scenario 1: Tax-Free Vacation Home Personal Use: > 14 Days Rental Use: < 15 Days This scenario is generally the best tax answer, but it\u2019s also the least profitable because you\u2019re only renting the vacation home for a couple weeks during the year!  Under this scenario, all the rental income you receive is tax-free.  Of course, because you aren\u2019t recognizing any income, you can\u2019t take any deductions either.  The only exception is that you can deduct real estate taxes and mortgage interest on this home as an itemized deduction, assuming you itemize deductions rather than taking the standard deduction.  If you own more than one vacation home, you must select the one to be treated as the second home for mortgage interest deduction purposes.  Scenario 2: Vacation Home Used as a Rental Personal Use: < 15 Days Rental Use: > 14 Days Under this scenario, you report on Schedule E all rental income you receive from renting out the vacation home, and you can deduct the full amount of direct rental expenses such as property management fees, advertising fees, credit checks, etc.  However, other costs \u2014 property taxes, mortgage interest, repairs, maintenance, cleaning, insurance, utilities, and yes, depreciation \u2014 must be allocated them based on the amount of time the property was rented and the time it was used personally (using the total number of days the property was used during the year as your denominator).  You can deduct the property taxes for the prorated personal use period on Schedule A along with your other itemized deductions.  You cannot take an itemized deduction for mortgage interest on Schedule A.  Scenario 3: Vacation Home Used as a Residence Personal Use: > 14 Days Rental Use: > 14 Days Under this scenario, you report on Schedule E all income you receive from the property and take deductions in the following order:  Mortgage interest and property taxes to the extent the property was used as a rental Direct rental expenses Operating expenses to the extent the property was used as a rental Depreciation to the extent the property was used as a rental If your property results in a tax loss, you cannot net it against other rental income.  It must be carried forward to future years, and even in those future years, the loss may only be applied to rental income from the same property.  Other Considerations Now, these aren\u2019t the only tax considerations when it comes to renting out a vacation home.  For one, if your vacation home is in another state from where you live, and that state imposes an income tax, you will likely have to file a tax return in that state.  Also, if your vacation home guests\u2019 average rental period is 7 days or less, your vacation home profit may not even be considered a rental activity but rather a business activity, subjecting you to the dreaded self-employment tax.","description":"This article covers the Vacation Home Tax Rules and what deductions you can take.","name":"Vacation Home Tax Rules Article","publisher":{"@type":"Organization","logo":{"@type":"ImageObject","url":"https:\/\/moneydoneright.com\/wp-content\/uploads\/Money-Done-Right-Personal-Finance-and-Investing-Blog.png","name":"Money Done Right Logo","height":"488","width":"60","@id":"https:\/\/moneydoneright.com\/#ImageObject"},"address":{"@type":"PostalAddress","name":"Money Done Right Address","addressCountry":"United States","addressLocality":"Valencia","addressRegion":"California","postalCode":"91354","streetAddress":"23890 Copper Hill Dr Ste 139","@id":"https:\/\/moneydoneright.com\/#PostalAddress"},"url":"https:\/\/moneydoneright.com\/","publishingPrinciples":"https:\/\/moneydoneright.com\/methodology\/","additionalType":"Blog","name":"Money Done Right","email":"support@moneydoneright.com","sameAs":["https:\/\/twitter.com\/moneydoneright","https:\/\/www.facebook.com\/moneydoneright\/","https:\/\/www.instagram.com\/moneydoneright\/","https:\/\/www.linkedin.com\/company\/money-done-right\/","https:\/\/www.pinterest.com\/moneydoneright\/","https:\/\/www.youtube.com\/c\/MoneyDoneRight"],"foundingLocation":"https:\/\/en.wikipedia.org\/wiki\/Santa_Clarita,_California","legalName":"Allec Media LLC","naics":"519130","parentOrganization":"https:\/\/moneydoneright.com\/#ParentOrganization","founder":{"@type":"Person","hasCredential":["https:\/\/cslainstitute.org\/","https:\/\/en.wikipedia.org\/wiki\/Certified_Public_Accountant"],"url":"https:\/\/moneydoneright.com\/author\/logan-allec\/","spouse":"https:\/\/moneydoneright.com\/author\/caroline-allec\/","image":"https:\/\/moneydoneright.com\/wp-content\/uploads\/2020\/01\/Logan-Allec-Money-Done-Right.jpg","name":"Logan Allec","description":"Logan Allec is a practicing Certified Public Accountant, Certified Student Loan Professional, and the founder of personal finance blog Money Done Right.  He provides a second level of review for the site\u2019s more technical articles, particularly those pertaining to taxation, credit, and student loans. He also educates thousands of people every week on The Money Done Right Show.","email":"logan.allec@moneydoneright.com","sameAs":["https:\/\/loganallec.com\/","https:\/\/twitter.com\/loganallec","https:\/\/www.benzinga.com\/author\/logan-allec","https:\/\/www.facebook.com\/logan.allec","https:\/\/www.fareverse.com\/writer\/logan-allec-cpa-freelance-writer\/","https:\/\/www.instagram.com\/loganallec\/","https:\/\/www.legalzoom.com\/author\/logan-allec","https:\/\/www.rent.com\/blog\/author\/logan-allec\/","https:\/\/www.thebalance.com\/logan-allec-5192331","https:\/\/www.youtube.com\/channel\/UC3Jg7eUCBPsjX13X7kTW1hQ"],"familyName":"Allec","givenName":"Logan","birthDate":"1988-08-04","birthPlace":"https:\/\/en.wikipedia.org\/wiki\/Anaheim,_California","alumniOf":["http:\/\/www.ucla.edu\/","https:\/\/en.wikipedia.org\/wiki\/Ernst_%26_Young","https:\/\/www.usc.edu\/"],"gender":"Male","jobTitle":"Founder","nationality":"https:\/\/en.wikipedia.org\/wiki\/Americans","worksFor":{"@id":"https:\/\/moneydoneright.com\/#Organization"},"@id":"https:\/\/moneydoneright.com\/author\/logan-allec\/"},"@id":"https:\/\/moneydoneright.com\/#Organization"},"author":{"@id":"https:\/\/moneydoneright.com\/author\/logan-allec\/"},"@id":"https:\/\/moneydoneright.com\/taxes\/personal-taxes\/vacation-home-tax-rules\/#Article"},{"@context":"https:\/\/schema.org\/","@type":"BreadcrumbList","itemListElement":[{"@type":"ListItem","position":1,"name":"Taxes","item":"https:\/\/moneydoneright.com\/taxes\/#breadcrumbitem"},{"@type":"ListItem","position":2,"name":"Personal Taxes","item":"https:\/\/moneydoneright.com\/taxes\/\/personal-taxes\/#breadcrumbitem"},{"@type":"ListItem","position":3,"name":"Vacation Home Tax Rules: What Deductions Can I Take?","item":"https:\/\/moneydoneright.com\/taxes\/personal-taxes\/vacation-home-tax-rules\/#breadcrumbitem"}]}]