Maybe you own a vacation home as a getaway for the family during summers and long weekends. But now that the kids are grown, you’re not using the place much anymore.
Strategy: Rent out the home this summer. Although it can be a hassle, the tax benefits generally outweigh the inconvenience.
For starters, the rental income you receive can offset most or all of the carrying costs. What’s more, you can use rental expenses—repairs, utilities, insurance, depreciation and so on—to reduce the rental income for tax purposes. Depending on your situation, you might even be able to claim a tax loss.
However, if you’re not careful, you could fall into a tax trap for excessive personal use.
Here’s the whole story: If your personal use of the vacation home exceeds the greater of 14 days or 10% of the time the home is rented out, the deduction for rental expenses is limited to the amount of the rental income. In other words, no tax loss is...(register to read more)