Tax free income off STR?

Question

If I live in my second home for more than 14 days out of the year (second home), what does this mean for all other income I received for STR for the year? How is this income taxed?

Thank you

Ashish Acharya · Answer

You are confused on the vacation rentals home rules. This is high level overview. I am not sure exactly what you are trying to ask.

Three separate categories when determining their tax treatment of  residential rented property :

Note: A taxpayer's dwelling used for personal purposes for more than 14 days during the year, or more than 10% of the number of rental days if greater, is considered to be a residence.

• a. Personal Residence. A residence(See above) that is rented for fewer than 15 days during the year.No income or expense. Can Itemize deduction.Note: The exclusion for rents when the property is rented for fewer than 15 days only applies to a home that qualifies as a residence. Thus, it does not apply to a home that is rented during the year if personal use during the year is less than 15 days (or, if 15 days or more, personal use days are not greater than 10% of the rental days) and  Under the fewer-than-15-days-rental rule, days on which property is rented for less than fair rental value are still considered as “rented”
• No income or expense. Can Itemize deduction.Note: The exclusion for rents when the property is rented for fewer than 15 days only applies to a home that qualifies as a residence. Thus, it does not apply to a home that is rented during the year if personal use during the year is less than 15 days (or, if 15 days or more, personal use days are not greater than 10% of the rental days) and  Under the fewer-than-15-days-rental rule, days on which property is rented for less than fair rental value are still considered as “rented”
• 
• b. Vacation Home. A residence with a combination of personal and rental use (when personal use exceeds the greater of 14 days or 10% of rental days and rental use exceeds 14 days).Prorate expense based on personal use
• Prorate expense based on personal use
• c. Rental Property with Personal Use. Property used personally for fewer than (1) 15 days per year or (2) 10% of the rental days, if greater.Prorate expense based on personal use .  ( Except for real estate taxes, expenses attributable to personal use of a rental property are not deductible. This includes the allocable mortgage interest expense since the property does not qualify as a “residence.” This disallowance of allocable mortgage interest can be a significant tax trap for taxpayers who use rental properties personally.)
• Prorate expense based on personal use .  ( Except for real estate taxes, expenses attributable to personal use of a rental property are not deductible. This includes the allocable mortgage interest expense since the property does not qualify as a “residence.” This disallowance of allocable mortgage interest can be a significant tax trap for taxpayers who use rental properties personally.)

• No income or expense. Can Itemize deduction.Note: The exclusion for rents when the property is rented for fewer than 15 days only applies to a home that qualifies as a residence. Thus, it does not apply to a home that is rented during the year if personal use during the year is less than 15 days (or, if 15 days or more, personal use days are not greater than 10% of the rental days) and  Under the fewer-than-15-days-rental rule, days on which property is rented for less than fair rental value are still considered as “rented”

• Prorate expense based on personal use

• Prorate expense based on personal use .  ( Except for real estate taxes, expenses attributable to personal use of a rental property are not deductible. This includes the allocable mortgage interest expense since the property does not qualify as a “residence.” This disallowance of allocable mortgage interest can be a significant tax trap for taxpayers who use rental properties personally.)

John Underwood · Answer

First of all you pay tax on all the net income.

If you live in the property for more than 14 days you to start pro-rating your deductions which will mean you will  pay more tax since you have less deductions against your income.

Chris K. · Answer

@Chris Klingemann follow up, or do I need to live in the residence for more than 14 days or more of 10% of rental days in order to qualify for any income tax advantages/ savings ?