Accounting Services for Small
Businesses
- Renting out a vacation property to
others can be profitable. If you do this, you must normally report the rental
income on your tax return. You may not have to report the rent, however, if the
rental period is short and you also use the property as your home. Here are
some tips that you should know:
Vacation Home. A vacation home can be a house, apartment,
condominium, mobile home, boat or similar property.
Schedule E. You usually report rental income and rental
expenses on Schedule E, Supplemental Income and Loss. Your rental income may
also be subject to Net Investment Income Tax.
Used as a Home. If the property is “used as a home,” your
rental expense deduction is limited. This means your deduction for rental
expenses can’t be more than the rent you received. For more about these rules,
see Publication 527, Residential Rental Property (Including Rental of Vacation
Homes).
Divide Expenses. If you personally use your property and also
rent it to others, special rules apply. You must divide your expenses between
rental use and personal use. To figure how to divide your costs, you must
compare the number of days for each type of use with the total days of use.
Personal Use. Personal use may include use by your family.
It may also include use by any other property owners or their family. Use by
anyone who pays less than a fair rental price is also considered personal use.
Schedule A. Report deductible expenses for personal use
on Schedule A, Itemized Deductions. These may include costs such as mortgage
interest, property taxes and casualty losses.
Rented Less than 15 Days. If the property is “used as a home” and you
rent it out fewer than 15 days per year, you do not have to report the rental
income. In this case you deduct your qualified expenses on Schedule A.
If you would like any additional information please feel free to contact
me.
Amare
Berhie, Senior Tax Accountant
(651)
300-4777
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