The "14-day rules" refer to the guidelines set by the Internal Revenue Service (IRS) regarding the rental income and tax implications of second homes. These rules determine whether a property is considered a personal residence, a rental property, or a combination of both. Here is an overview of the 14-day rules and how they apply to second homes versus rentals:
Personal Use
If you use your second home for personal purposes more than 14 days or 10% of the total days it is rented (whichever is greater), the property is classified as a personal residence. In this case, you can deduct mortgage interest and property taxes, just like you would for your primary residence, within the limits set by tax laws.
Rental Use
If you rent out your second home for more than 14 days in a calendar year and your personal use is less than the greater of 14 days or 10% of the rental days, the property is classified as a rental property. This means you are required to report the rental income on your tax return. However, you can also deduct rental-related expenses, such as maintenance, repairs, and property management fees.
Mixed-Use Property
If you use your second home for both personal and rental purposes, and your personal use exceeds the greater of 14 days or 10% of the rental days, the property is considered a mixed-use property. In this case, you can only deduct expenses related to the rental portion of the property, based on the percentage of days it was rented.
Vacation Home Rental
If you rent out your second home for fewer than 15 days in a calendar year, the property is classified as a vacation home rental. In this scenario, you are not required to report the rental income, and you cannot deduct rental expenses. However, you can still deduct mortgage interest and property taxes as itemized deductions, subject to certain limitations.
Final Thoughts
It's important to note that these rules apply to second homes that are not classified as your primary residence. If you rent out your primary residence for part of the year, different rules may apply. Understanding the 14-day rules is crucial for properly reporting rental income and maximizing tax benefits. Consult with a tax professional who can provide guidance tailored to your specific situation and ensure compliance with IRS regulations.
