Industry News

Renting second home complicates taxes

Real Estate Tax Talk

Learn the New Luxury Playbook at Luxury Connect | October 18-19 at the Beverly Hills Hotel

Many people who own vacation homes they no longer need or can afford are renting them out because they can't sell them at a decent price, or sell them at all. The tax treatment of the income and expenses from a vacation home depends on how much the owners use it. Things can get complicated if you spend time in your vacation home for part of the year and also rent it out.Unfortunately for vacation homeowners, Congress has decided that they should not be allowed to deduct operating expenses and depreciation costs for the time they use a second home as a personal residence. There are complicated tax rules homeowners must follow to ensure that they don't deduct too much for their second home. If a home is used as both a rental property and a residence, these rules require that you allocate expenses between the two types of use. The rules differ depending on the amount of time the property is used as a rental and as a residence.Limited rentalYour vacation home rental income is fully tax-fr...