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  • Re: vacation/rental house is 14-day rule pro-rated ?

    From Stuart O. Bronstein@21:1/5 to JGE on Mon Dec 4 11:23:00 2023
    JGE <[email protected]> wrote:

    We have a house classified as "vacation/short-term rental" on Schedule
    E. There's a "14-day rule" that's critical in deciding if a house is
    a personal residence or a business, described in sites such as this:

    https://www.vacasa.com/homeowner-guides/vacation-home-tax-rules

    My question, if one owns the house for less than a full tax year, or
    changes its status during the year, are the 14 days pro-rated, that
    is, is the number 14 reduced according the percentage of the year that
    the house was owned or considered a business ?

    For example, we purchased the house at the end of April 2022, so owned
    it roughly 2/3 of the year. Does that mean we were only allowed to
    use it for personal use 9 or 10 days (during the portion of 2022 we
    owned it) ? Does it mean we only needed to rent it for 10 days to
    satisfy the threshold to consider it a business ?

    Similarly, if we convert it to being a 2nd residence during 2024,
    roughly 1/3 of the way into the year, can we only use it for personal
    use 4 or 5 days during that first 1/3 of the year that we considered
    it a business, and need we rent it only 5 days ?

    The code only says the house has to be used during the year as your
    principal residence. It doesn't give any time requirements, and does not require pro-rating.


    --
    Stu
    http://DownToEarthLawyer.com

    --
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  • From Stuart O. Bronstein@21:1/5 to JGE on Tue Dec 5 13:34:45 2023
    JGE <[email protected]> wrote

    Addressing the specifics of your last two paragraphs - (For
    example,...) There is no limit on the number of personal days (that
    is, not "9 or 10 days") you could use the property. It also doesn't
    mean that you had to rent it for 10 days to consider it a business.
    It means that if you only rented it for 10 days, you could choose not
    to treat it as a business and not have to report the rent you
    received.

    Yes, but. my understanding is that if I rented it for less than 14
    days, I cannot write off any business expenses. But I rented it for
    10 days while owning it 2/3 of the year, which works out to a rate of
    15 days for a full year. Does that mean I CAN write off business
    expenses ?

    The (up to) 14 days of free rent is inconsistent with the property being
    used for business purposes. You get one or the other, not both. If you
    choose the tax-free rent option, you get no business deductions for that
    time.


    --
    Stu
    http://DownToEarthLawyer.com

    --
    << ------------------------------------------------------- >>
    << The foregoing was not intended or written to be used, >>
    << nor can it used, for the purpose of avoiding penalties >>
    << that may be imposed upon the taxpayer. >>
    << >>
    << The Charter and the Guidelines for submitting posts >>
    << to this newsgroup as well as our anti-spamming policy >>
    << are at www.asktax.org. >>
    << Copyright (2011) - All rights reserved. >>
    << ------------------------------------------------------- >>

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    * Origin: fsxNet Usenet Gateway (21:1/5)
  • From Stuart O. Bronstein@21:1/5 to JGE on Tue Dec 5 18:15:17 2023
    JGE <[email protected]> wrote:

    The (up to) 14 days of free rent is inconsistent with the property
    being used for business purposes. You get one or the other, not both.
    If you choose the tax-free rent option, you get no business
    deductions for that time.

    So even if I rent it for less than 14 days, I can choose to pay tax on
    the rent and then deduct business expenses (proportional to business
    versus personal use) ?

    Section 280A doesn't make it optional. If you have used the property as
    your primary residence and then rent it out for fewer than 15 days during
    the year, the income you receive for that rental is tax exempt, and there
    are no deductions allowed for that rental period.


    --
    Stu
    http://DownToEarthLawyer.com

    --
    << ------------------------------------------------------- >>
    << The foregoing was not intended or written to be used, >>
    << nor can it used, for the purpose of avoiding penalties >>
    << that may be imposed upon the taxpayer. >>
    << >>
    << The Charter and the Guidelines for submitting posts >>
    << to this newsgroup as well as our anti-spamming policy >>
    << are at www.asktax.org. >>
    << Copyright (2011) - All rights reserved. >>
    << ------------------------------------------------------- >>

    --- SoupGate-Win32 v1.05
    * Origin: fsxNet Usenet Gateway (21:1/5)