If you receive money for the use of your primary residence, you may have to report this rental income on your tax return; this means that the “vacation home rental” classification can apply to your home, even if you don’t own multiple short-term rental properties. The rental expense deduction is limited in the case of a property used as a home; the rental expenses can’t be more than the rent received. The rental income may not require reporting if you rent the house to your tenant for fewer than 15 days during the year.
A vacation home is a house, apartment, condominium, or other dwelling that you use to generate income, but you can also use it as a residence during the year. For tax purposes, it’s critical to divide the expenses of a property into personal and business purposes.
To report rental income and rental expenses, use Schedule E. In addition, rental income may be subject to a net investment income tax.
*This tax tip is for informational purposes only and is not a replacement for real-life advice. Consult your tax, legal, and accounting professionals for more specific information.
Tip adapted from IRS.gov4
Footnotes and Sources
- IRS.gov, September 25, 2023
