If you own a second home or a cabin or a vacation property that you live in only occasionally and rent out at other times, you might be able to deduct expenses you pay to maintain the property from your rental income. In addition, you might be able to classify the home as investment property instead of personal property, which offers multiple tax and estate-planning benefits.
In order to fully qualify to deduct expenses and/or designate the home or cabin as investment property, you must meet one of the following two requirements:
- You use the property as a dwelling for no more than 14 days per year AND rent it out for at least 15 days per year.
2. You use the property as a dwelling for more than 14 days per year but not more than 10% of the number of days you rent it out. For example, if you rent out the home for 200 days a year, you may use it as a dwelling for up to 20 days.
Under IRS rules, the term “using as a dwelling” includes not only using the home yourself, but also offering use of the home to friends, family, anyone with a financial interest in the property, or anyone who pays less than a fair rental price.