Renting out a vacation property to others can be profitable. If you do this,
you must normally report the rental income on your tax return. You may
not have to report the rent, however, if the rental period is short and you
also use the property as your home. Here are some tips that you should know:
- Vacation Home. A vacation home
can be a house, apartment, condominium, mobile home, boat or similar
property.
- Schedule E. You usually
report rental income and rental expenses on Schedule
E, Supplemental Income and Loss. Your rental income may also be
subject to Net
Investment Income Tax.
- Used as a Home. If the property is
“used as a home,” your rental expense deduction is limited. This means
your deduction for rental expenses can’t be more than the rent you
received.
- Divide Expenses. If you personally
use your property and also rent it to others, special rules apply. You
must divide your expenses between rental use and personal use. To figure
how to divide your costs, you must compare the number of days for each
type of use with the total days of use.
- Personal Use. Personal use may
include use by your family. It may also include use by any other property
owners or their family. Use by anyone who pays less than a fair rental
price is also considered personal use.
- Schedule A. Report deductible
expenses for personal use on Schedule
A, Itemized Deductions. These may include costs such as mortgage
interest, property taxes and casualty losses.
- Rented Less than 15
Days.
If the property is “used as a home” and you rent it out fewer than 15 days
per year, you do not have to report the rental income. In this case you
deduct your qualified expenses on Schedule A.
Source: Internal Revenue Service
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You should use schedule E to report income or loss from rental real state, royalties, partnerships, S corporations, estates, trusts, and residual interests in REMICs.
If you are filing schedule E, you may have to file other schedules and forms:
- Schedule A (Form 1040) to deduct interest, taxes, and casualty losses not related to your business.
- Form 3520 to report certain transactions with foreign trusts and receipt of certain large gifts or bequests from certain foreign persons.
- Form 4562 to claim depreciation (including the special allowance) on assets placed in service in 2015, to claim amortization that began in 2015, to make an election under section 179 to expense certain property, or to report information on listed property.
- Form 4684 to report a casualty or theft gain or loss involving property used in your trade or business or income-producing property.
- Form 4797 to report sales, exchanges, and involuntary conversions (not from a casualty or theft) of trade or business property.
- Form 6198 to figure your allowable loss from an at-risk activity.
- Form 8082 to notify the IRS of any inconsistent tax treatment for an item on your return.
- Form 8582 to figure your allowable loss from passive activities.
- Form 8824 to report like-kind exchanges.
- Form 8826 to claim a credit for expenditures to improve access to your business for individuals with disabilities.
- Form 8873 to figure your extraterritorial income exclusion.
- Form 8910 to claim a credit for placing a new alternative motor vehicle in service for business use.
- Form 8960 to pay Net Investment Income Tax on certain income from your rental and other passive activities.
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