A vacation home can be a house, apartment, condominium, mobile home or boat. If you own a vacation home that you rent to others, you generally must report the rental income on your federal income tax return. But you may not have to report that income if the rental period is short. In most cases, you can deduct expenses of renting your property. Your deduction may be limited if you also use the home as a residence. See some rules below.
• You usually report rental income and deductible rental expenses on Schedule E, Supplemental Income and Loss.
• If you personally use your property and sometimes rent it to others, special rules apply. You must divide your expenses between the rental use and the personal use. The number of days used for each purpose determines how to divide your costs. If the property is “used as a home,” which is defined as personal use of more than 14 days per year or more than 10% of the total days it is rented to others if that figure is greater, then your deduction is limited. This means your deduction for rental expenses cannot be more than the rent you received. Report deductible expenses for personal use on Schedule A, Itemized Deductions. These may include costs such as mortgage interest, property taxes and casualty losses.
• 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.