Count Your Days Carefully – How to Calculate Maintenance Days vs. Personal Days for Vacation Home Rentals
Count your personal days carefully.
If you own vacation property that you also rent, you know that the deductions you can take on your tax return are usually limited to the amount of your gross rental income. However, if you use your vacation home less than 15 days during the year or for less than 10% of the days rented at fair rental price, you may be able to deduct losses in excess of gross rental income against your ordinary income.
It is important to count the days correctly as it may save your thousands of dollars in income taxes. I have seen two situations in the past several years where clients were able to save thousands of tax dollars because of changes to their number of usage days. In one case, a family illness cut personal days below the fifteen day minimum. In another situation, the taxpayer had personal obligations that kept him and his family from enjoying their mountain home for more than 10% of the days rented.
In both cases, proper counting of maintenance days helped get them under the minimum.
If you spend most of the day doing maintenance to your rental property, it does not count as a usage day.
According to the US Tax Court in Malssen v. Commissioner, T.C. Memo. 2014-236, travel days to your vacation property are not counted as personal use days if the primary purpose of the trip is to maintain the property. If the majority of the days spent at the vacation property are to maintain the property, then the primary purpose of the trip is maintenance.
For example, on Friday I travel to my condo and spend the evening there. I work on maintaining the condo on Saturday and Sunday. I take a vacation day on Monday. Since I spend two of my three days working, I do not have to count spending Friday night as a personal use day.
Remember that all situations differ, so give me a call with questions regarding your unique situation.