ron731
Returning Member

Impact of personal days (Schedule E) on bottom line

My wife and I are thinking about purchasing a beach house and substantially renting it for two years until she retires.  Afterwards, we would increase our use.  I am trying to understand the tax impacts, so I filled out alternate Schedule E's -- in my TT 2018 return --using the same amounts (with expenses $15,000 greater than income) except for altering personal days. In the first one, we would use the property only 5 personal days that year.  In the second, we would use it 50 personal days.  I got the opposite of what I expected: there was no tax impact on my taxes when we used it only 5 days; there was approximately $1600 deduction when using 50 days.  Then when I did the same with TT 2019, neither scenario changed my bottom line. 

 

I guess I just don't understand.  Can someone help explain this? 

AmyC
Expert Alumni

Deductions & credits

Your scenario did not work out right.  Please follow the blue links for more information.  I recommend looking at the actual Schedule E form and instructions. The Sch E should be reporting your expected income and your expected expenses. The allowable expenses will be reduced with your personal days. Personal days do not include days where you are doing work, upkeep. maintenance.

 

The best source of information is the IRS. They have a news article on rentals. They also have a full publication of everything you would want to know.

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ron731
Returning Member

Deductions & credits

Thanks for the reply! I actually did what you suggested before asking my question.  I not only read that material and the Schedule E instructions, but also and IRS Topic 415 Renting Residential and Vacation Property).  I also used the actual form itself as well as the TT Worksheet.  The only thing I did differently was change the number of personal days from 50 to 5.  And as I said, the Schedule E (2018) with 50 days of personal use reduced my taxes by $1,600 and the Schedule E with 5 days personal use did not give me any reduction or increase.  Again, that seems backwards since the 50 days personal use resulted in proration of expenses.  As for TT 2019, changing the number of personal days did not change alter my tax in any way.  I appreciate your thoughts and time.  Thanks!