Vacation Home Expenses

Your deductible expenses are limited if you both use your home for personal use and rent it out. Expenses are deducted in a certain order. Qualified mortgage interest as a second home and real estate taxes are not limited. They are deducted either on the rental schedule for the rental portion or the personal use portion is deducted on schedule A under itemized deductions. Any operating expenses directly related to the rental activity such as management fees or advertising are deducted on the rental schedule. The rental portion of all other indirect expenses such as maintenance, insurance, and depreciation can then be deducted on the rental schedule per days rented to total days occupied . The personal use portion is nondeductible. If your personal use generally exceeds 14 days, then you cannot create a deductible loss from the property. Unused rental expenses can be carried forward to later years. Any day rented to anyone at less than fair rental price is a personal use day and any day rented to family unless it is their main home is a personal use day. If you spend most of the day working on the property, then that day is not counted as a personal use day. An important point to remember is that just one day of personal use triggers the vacation home limitations on deductions.