John M. Hoffman & Associates CPAs
Frequently Asked Tax Questions
Vacation home rental:
The vacation home rental provision prevents taxpayers who use a vacation or other rental property more than 14 days per year from claiming losses on such rental. This is different than a “suspended passive loss”, this is simply a disallowed loss. Expenses are allocated between days rented and days used for personal use (in simple terms). If the resulting rental activity is a loss, the loss is not deductible. There are special ordering rules as to which expenses are first considered used to offset rental losses. This is important when determining what remaining mortgage interest or taxes are deductible as an itemized deduction as well as how much depreciation is allowable as a basis reduction to the asset.
If a rental property is used more than 14 days for personal use (including friends and family who rent for less than fair market value), be sure to let us know.
