Tax Benefits of Owning a Vacation Rental Property

Many families enjoy a yearly trip to a favorite ski resort or coastal paradise, and this leads to the eventual thought of whether or not

Tax Benefits, Real Esate, Vacation Rental Property

Tax Benefits of Owning a Vacation Rental Property

it would be a smart investment to purchase a vacation property instead of renting each year. If you are considering the possibility of buying a second home or vacation rental, then it is important to understand the tax benefits of owning a vacation rental property.

Much of the taxes that you can deduct on your vacation home depend on the amount of time that you spend at the property for personal use. As a standard, property taxes and mortgage interest can be deducted on up to two homes totaling $1 million in mortgage debt. This is allowed whether or not you actually rent out the condo or home when you are not using it yourself, so you are guaranteed a tax break no matter how you use your vacation property.

From there, the tax rules become a little more complex, which is why speaking with your accountant to verify your personal tax situation and understand the exact ramifications for your personal time at the property is so important. Let’s take a quick look at some of the different options for tax deductions when you rent out your vacation property, so you can have a general idea of what to expect.

3 Tax Scenarios for Vacation Rental Homes

First, homeowners that spend a good deal of time at their vacation home (over 14 days) and rent it out a good portion as well (over 14 days) can deduct some of their utilities, maintenance, operating costs, HOA fees, insurance, and depreciation for that rental period. In this scenario the home has a time period where it is considered a private residence and a timeframe where it is treated as rental unit. The extra deductions can help you offset the rental income you have made up to the point where you zero out the income with tax deductions.

Second, a vacation rental investor who stays in the home less than 14 days or 10% of the rental period, whichever is greater, can treat the vacation home as a rental property. This allows the investor to deduct a far larger percentage of the utilities, maintenance, HOA dues, insurance, depreciation, and operating costs based off of the total days the home was used. In addition, if the rental income does not completely cover the cost of the rental timeframe, you might be eligible to write off up to $25,000 in rental losses. This is strictly for individuals who show an adjusted gross income of under $100,000 and gets progressively lower as the income approaches $150,000 and is phased out completely.

Third, property owners who rent their vacation home less than 15 days of each year do not have to pay any taxes whatsoever on the rental income. So, if you have the good fortune to have a vacation property or second home in an area with a big yearly event and you can rent it out for two weeks or less at a high rate, then you have the benefit of enjoying that income completely tax free.

Now that you have an idea of the many tax benefits associated with owning a vacation rental property, it is important that you speak with your accountant to confirm exactly what type of rental owner you are and how that might earn you even greater tax deductions from your second home.

Preston Guyton is a professional Realtor? serving the Myrtle Beach real estate market. For more information on Myrtle Beach homes, contact Preston today or visit


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