You can enjoy a
vacation home and cut your taxes - with some careful planning and a little
discipline.
The IRS rules
can be complex and potentially restrictive, so a word of caution is in order as
you plan the use of your vacation home.
Owners of
vacation homes often rent out the property when they're not using it
themselves. Renting out your vacation home may or may not make sense for you.
The principal variables are the number of days you rent the property, the
number of days of personal use, your individual tax situation, and your
personal wishes for the use of your vacation home.
* Rent for 14
days or less and a simple tax break is available. If you rent your vacation
home for 14 days or less, all of the rental income is tax-free. This attractive
tax benefit can help provide cash for your mortgage and other expenses.
* Rent for more
than 14 days and your tax planning and personal life become more complex. If
you rent your vacation home for more than 14 days, all your rental income is
reportable. Whether you treat the income and expenses as a second residence or
as rental property depends on the personal use of your vacation home relative
to the time the home is rented out. This test is made annually and determines
the nature of deductions, loss carryovers, and the tax treatment if the
vacation home is sold.
Please call us
to guide you through the IRS rules to find the rental strategy that meets your
financial goals, yet ensures the personal enjoyment of your vacation home.
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