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When you use a vacation home as your residence and also rent it to others, you must divide the expenses between rental use and personal use, and you may not deduct the rental portion of the expenses in excess of the rental income.According to IRS method - you generally must divide your total expenses between the rental use and the personal use based on the number of days used for each purpose. So the factor for rental use in your example would be 35 / (35 + 88) = 28.5%The fact of itemizing or not is irrelevant for that deduction.However - as you likely know - there is another allocation method which is based on the Tax Court ruling - so the factor for rental use in your example would be 35 / 365 = 9.6%. That allocation may be used ONLY to real estate taxes and home mortgage interest. All other expenses must be allocated using the first method.However the Tax Court method would provide less deduction in your situation. So using this method might benefit if you itemize. There are no there allowed allocation methods.
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Lev...thanks for your response
Lev..........thanks for responding to my questions.. I follow you to a point but still need to know the following:
Lev, ...thanks for responding. Still need to know the following: There are expenses that are paid for the 264 days of the year that the property was NOT utilized by family members or renters.......Lawn services, electric, INSURANCE, PROPERTY TAXES, telephone, plumber costs to open and close the property, minimum water and cable connection charges, etc. Basic maintenance costs!! Are any of these costs in your opinion able to be added to the costs that are clearly incurred during the time that the property is rented (35 days) or used by family members (88 days)? Have you every had any audits on this issue? Thanks John
I had no audit experience specifically for vacation rentals.However as allocation method related to repairs, maintenance, depreciation and other rent-related expenses - the IRS clear indicates to use an allocation formula based on the percentage relationship between the number of days the property is rented and the total number of days the property is used, including personal-use days.Requirements to use that allocation are based on the fact - the property that has been used by the taxpayer for personal purposes for more than 14 days during the tax year OR more than 10% of the number of days the home is rented at a fair rental value - and your example satisfies that test - so the IRS allocation method is allowed.
Hello....I'm on line to answer any questions you have
John - are you able to see my post above? Or you want me to switch to Q&A mode?
Lev, Did you receive my questions responding to your initial response to me?
I feel that we have chat communication issues... Will change to Q&A mode. Please refresh your screen.
Lev, If I understand what you are saying, I can allocate for example the entire yearly insurance bill, in my case $1500?
$1500 x (35/123days) rental portion and (88/123days) personal portion
Same would apply to lawn service????
Am I on the right track?
Thanks Lev.............Good Job!
Thanks for taking the time out to provide me with this additional information . Have a great weekend!