Have you ever thought about using your home as a vacation rental to make some extra income? If you aren’t careful, the potential tax ramifications may surprise you. That’s because Mixed-Use Rental Property rules come into play. A Mixed-Use Property is a residence used for both personal and business purposes, even rental purposes.
On a recent episode of “Unique Perspectives – The DGC Podcast,” Jeremy T. Roy, CPA, MST, a Manager in DGC’s Private Client Group, discussed some of the tax pitfalls you may encounter by renting out your property or even a piece of your property.
“We’ve certainly started to see an increase in the number of clients that are either currently or considering renting out a personal residence whether it be their primary home, their second home, or vacation home,” Roy said. “Technology and some of the web-based advertising sites that are out there have really created a much more efficient model to make this a more accessible option than it used to be in the past.”
Roy admits the tax rules are very complex when it comes to Mixed-Use Rental Properties so you should consult your tax advisor before you consider moving forward.
“In general, certain expense categories, some of the bigger ones being depreciation, mortgage interest, and real estate taxes can be treated and allocated differently based on the usage of the property,” Roy said.
Some of the factors that could come into play are:
One of the more interesting nuances to the tax rules regarding Mixed-Use Rental Properties is the 14-Day Rule. If you use the property personally for more than 14 days, and you keep the rental days under 14, then you do not have to report the rental income generated.
“Depending on where the property is located, you may be able to take advantage of a significant amount of income that doesn’t need to be reported,” Roy said.