A question that often comes up is whether a rental property can be used by the owner as a vacation home. You may have a rental property at the beach or in some other location that’s popular for vacations. Perhaps you’ve been renting it out and generating some losses out of that. As the owner, you are successfully deducting those losses on your tax return. If you decide you’d now like to use that property personally, you’ll need to be aware of the rules that apply. If you use the property for too many days personally, it’s no longer a rental property, and you can’t deduct those losses.
Vacation Rental Property Rules
The law says if you use the rental property for the greater of 14 days or 10 percent of the rental days, it’s considered a vacation home and not a rental property. So, you can’t deduct that rental loss. Here’s an example. You have a rental property at the beach, and it’s rented for 210 days during the year. You use the home 21 days out of the year personally. In this scenario, you haven’t used the property for more than 10 percent of the rental days. So, it’s still a rental property, and you can deduct the losses. But if you use it for 22 days, it’s considered a vacation home and you can’t deduct those losses. So it’s important that you really keep track of these personal use days. In one year, it might be a rental property and in another year it might be a vacation home because you exceeded the number of days.
Document Your Days
If you are working with a property management company, make sure they are keeping accurate records of the days that you’re using the property and the days it’s being rented out. If you’re audited by the IRS, you’ll need to produce those records.
Please contact us at Mercer Properties if you have any questions about your rental property or San Diego property management.