A couple of vacation rental tax tips and one big caveat for those that do

  • Owners of vacation homes, or those thinking of renting out their second homes as vacation rentals, must know the tax rules on rental income from second homes.
  • One of the best tax code’s freebies allows homeowners who rent out their property for 14 or fewer days a year to pocket the rental income, tax-free.  It’s available to anyone renting out a home, and the income doesn’t have to be reported on the owner’s tax return as long as the rental period is 14 or fewer days.  The taxpayer can’t take depreciation or maintenance deductions but can deduct mortgage interest and property taxes on Schedule A.
  • Things get much more complicated if a home is “mixed use,” meaning the owner uses it himself and rents it out.  In that case, he has to count the rental days and determine what percentage they are of the total number of days the property was used.  That gives the percentage of expenses such as maintenance, utilities, property taxes, mortgage interest, and depreciation that are deductible from the rental income.
  • The caveat, and a very important consideration in vacation renting any home, check the local ordinances to see if it is legal. Many communities and counties ban the overnight renting of homes and most have minimum 30 day rental stays. Here in the Napa Valley, only the cities of Napa and St Helena permit vacation rental and this only by going through the regulatory process of obtaining a use permit. Recently here, there have been several stings conducted by local governments and the penalties and fines can be costly. If you advertise on such places as the web, anyone can see it and this is how many violators get caught. If your possible guest can see it, so can those who want to catch those who rent their homes illegally.

For more information about the tax rules of renting out a vacation home, please visit http://on.car.org/Rm8SdY.

A couple of vacation rental tax tips and one big caveat for those that do

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7 Comments on A couple of vacation rental tax tips and one big caveat for those that do

JUL
15
655,070 Points 2 Featured Posts Outside Blog Attended Rain Camp Called Shot Master

That is interesting and a part of the tax code I did not know.  Thanks
9:06am • #1
353,438 Points 3 Featured Posts Outside Blog Called Shot Master

Tim

Glad I could post some info you can use, cheers cvc
11:12am • #2
635,213 Points 53 Featured Posts Outside Blog Called Shot Master

Curtis,  This is great advice.  We have a lot of that going on here in the Rocky Mountains.  Many folks will buy a nice condo in a ski resort town and use it when they desire and then rent it the rest of the time.  Good to know all of the facts upfront.
11:28am • #3
702,136 Points 10 Featured Posts Outside Blog Called Shot Master

Curtis,

Good blog about vacation homes. I am a CPA and my advice to folks is to find a CPA tax expert to give rental tax advice. This is a complicated subject invloving what the IRS calls passive income and loss.

Cheers my friend..
3:03pm • #4
312,455 Points 3 Featured Posts Outside Blog Called Shot Master
I had forgotten about the 14 day rule. Thanks for reminding all of us
3:56pm • #5
406,265 Points 1 Featured Post Outside Blog Called Shot Master

Curtis,

              Good blog, thanks for the reminder as both you and Bob state it does get complicated my friend. I hope you are having a wonderful weekend! Take Care!
4:20pm • #6
JUL
16
353,438 Points 3 Featured Posts Outside Blog Called Shot Master

Hi

Thank the four of your for your insightful comments, cheers cvc
11:47am • #7


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Curtis Van Carter your Napa Valley Broker Extraordinaire in Yountville

Yountville, CA

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Coldwell Banker Brokers ofthe Valley, Yountville Napa Valley

Address: PO Box 2905, Yountville, CA, 94599

Office Phone: (707) 944-0421

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