Save on Taxes through a Vacation Home

KEY LARGO, Fla. - March 28, 2014 - PRLog -- Per Sally Stribling top producing Real Estate Agent for Coldwell Banker Schmitt in the upper Fl Keys, “So, you’ve bought a second home as a vacation property and you absolutely love the fact that you and your family have a place to stay and can take a few days offs on a whim. Still, the property isn’t free and you’re considering renting it out--at least for a few weeks or maybe a season.

The problem is, you’re just not sure how long you ought to rent it out because you're also unsure as to what Uncle Sam will have to do with that extra income. You do know that practically any income is taxable and want to know what’s the best rental situation for you.

The answer really lies in how much you use the property, not somebody else. It also depends largely on your willingness to be a short-term landlord. So, let’s look at some possibilities.

Types of Rental Income

Basically, as far as the Internal Revenue Service is concerned, there are three kinds of rental properties:

●      The property is rented out to temporary tenants for most of the calendar year

●      The property is only rented for a short period

●      The property is just rented when you aren’t vacationing in it

As you can see, it’s a mixture of personal use and income generation. The IRS puts the otis on those two qualifiers; and, it’s up to you to how much you use it and how much someone else pays you to stay there.

A Vacation Home as a Full Time Rental Property

Let’s suppose it’s the case you vacationed in your second home quite a bit in the past, but now, that’s no longer the case for whatever reason. You don’t want to give up the equity its built, nor the leverage to purchase another property, and want to avoid the hassle of selling.

You stay there only 14 days a year or ten percent of the total time compared to its use as a rental. The income is taxable, but there are deductions which go along with such situations, like mortgage interest, maintenance, insurance, depreciation, and taxes and utilities, to name a few.

Short Term Rental Situations

If you still stay in your second home a lot, but only rent it for 14 or fewer days, it doesn’t matter how much income that temporary stay generated. It breaks down into the number of days, the number of renters, and that gets a bit complicated. Speak with a CPA or tax attorney for your specific situation.

Mixed Use

Where a tax professional is an absolute necessity is when you stay in the home for more than two weeks a year, yet rent it for a far great length of time. You’ll be able to deduct percentages; it just depends on the circumstances.

Sally Stribling
Source:Sally Stribling
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Tags:Key Largo Real Estate, Keys Vacation Homes, Keys Investments, Upper Keys Vacation Rentals
Industry:Real Estate
Location:Key Largo - Florida - United States
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