Rental property available for rent
IRS Rules for Deductibility for Personal Use of Rental Properties
- 1 Convert Real Estate Rental to Personal Residence
- 2 Tax Rules for Vacation Homes & Residential Rental Property
- 3 How Do I Calculate Taxable Income on Rental Properties?
- 4 Tax Write-Offs for Rental Property
IRS rules allow you to live in your rental property, but it may cost you. The time you stay in the property turns it into a part-time personal residence and costs you write-offs. You may, however, spend time in the rental residence working on it, without the time you spend there counting against you.
If you don’t rent your property out often, it might not be considered a rental property. In fact, according to the IRS, if you rent the property out for only two weeks per year or less, it’s not a rental property. Furthermore, you don’t have to report your income and can actually pocket it tax-free, although you can’t write off your rental expenses. Then again, if it’s your second house, you might still be able to write off its mortgage interest and property taxes with your itemized deductions.
Using your rental property for personal reasons limits your ability to write off your expenses for the property. What the IRS does is to reduce your deduction by an amount that commensurates with your personal use of the property. For example, if you rented a property out for 93 days a year and spent seven days using it yourself, you’d be able to write off 93 percent of the property’s expenses.
Rented or Owner-Occupied
While using your rental property for personal purposes limits your ability to deduct expenses, using it too much can turn it into an owner-occupied house. If you occupy the property for more than two weeks a year, or for more than 10 percent of the days that it’s available for rent, it ceases to be a rental property by the IRS’s definition. At that point, it becomes your personal residence that you also rent out. While you can still write off expenses against your rental income, if your expenses are greater than your income, you won’t be able to write off the loss against other income on your taxes.
Repairs and Inspections
You can spend time at your rental property without having it count as personal use. Time you spend at the property to inspect or repair it is considered a part of your responsibility as an owner, and the IRS doesn’t count it as personal use. However, you’ll need to document the work you do while you’re at the property.
About the Author
Steve Lander has been a writer since 1996, with experience in the fields of financial services, real estate and technology. His work has appeared in trade publications such as the “Minnesota Real Estate Journal” and “Minnesota Multi-Housing Association Advocate.” Lander holds a Bachelor of Arts in political science from Columbia University.