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5 Cards in this Set
- Front
- Back
Residence Test |
The owner’s personal use of the rental property for even one day during the tax year will cause application of the “vacation home” rules. If the home (dwelling unit) is rented out for 14 days or less (sometimes phrased as “less than 15 days”), then the rental income is not required to be included in gross income. However, no deductions attributable to the rental are allowed. |
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Infrequent Rentals, Frequent Personal Use |
If the vacation home is used by the taxpayer for personal use for more than 14 days a year and is rented for fewer than 15 days a year, the rental income is not taxable. Expenses attributable to the rental use of the property, such as repairs, maintenance, and depreciation, are not deductible. |
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Frequent Rentals, Infrequent Personal Use |
If the vacation home is rented more than 14 days per year and the owner’s personal use per year does not exceed the greater of 14 days or 10% of the number of days rented, then all of the rental income must be included in gross income. Deductions are permitted for a portion of the depreciation, maintenance, and operating expenses. The portion is determined by dividing the number of days rented by the total days used by the owner and renters. Mortgage interest and property taxes attributable to the rental use are deductible as rental expenses on Schedule E of the taxpayer’s return, while property taxes attributable to personal use are deductible if the taxpayer itemizes deductions on Schedule A of his or her return |
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Frequent Rentals, Frequent Personal Use |
If the vacation home is rented more than 14 days per year and during the year the owner uses the vacation home more than the greater of 14 days or 10% of the days the home was rented, all of the rental income is reported as gross income. Deductions allocable to rental use (operating expenses, maintenance, and depreciation) are limited to this gross income. |
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if the vacation home does not meet the residence test and the rental is an activity engaged in for profit, then the deductible rental expenses are not limited to the amount of gross rental income. The deductible loss generally may not exceed $25,000, due to the passive loss limitations |
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