IRS Tax Tip 2018-79, May 22, 2018
During the summer, taxpayers often rent out their property. They usually think about things such as cleanup and maintenance, but owners also need to be aware of the tax implications of residential and vacation home rentals.
If taxpayers receive money for the use of a house that’s also used as a taxpayer’s personal residence, it generally requires reporting the rental income on a tax return.
- Vacation Home. This may be a house, an apartment, condominium, mobile home, boat, vacation home or similar property. It's possible to use more than one unit as a residence during the year.
- Used as a Home. When the property is used as a home, the rental expense deduction is limited. This means the rental expenses cannot be more than the rent received.
- Personal Use. Personal use means use by the owner, owner’s family, friends, other property owners and their families. Personal use includes anyone paying less than a fair rental price.
- Divide Expenses. Generally, special rules apply to the rental expenses of a property used by the taxpayer as a residence during the taxable year. Usually, rental income must be reported in full, and any expenses need to be divided between personal and business purposes.
- How to Report. Taxpayers use Schedule E to report rental income and rental expenses. Rental income may also be subject to Net Investment Income Tax.
- Special Rules. If the home unit is rented out fewer than 15 days during the year, none of the rental income is reportable and none of the rental expenses are deductible.
- Tax Topic 415 – Renting Residential and Vacation Property
- Publication 527, Residential Rental Property (Including Rental of Vacation Homes)