The Tax Court allows a different allocation formula for interest and taxes (only) from the one the IRS describes in IRS Publication 527, Residential Rental Property.
- Under the Tax Court formula, interest and taxes are allocated on a daily basis. That is, the rental portion is the ratio of days rented to the number of days in the year.
- Under the IRS formula, interest and taxes are allocated in the ratio of days rented to days used (including personal days).
The Tax Court ratio results in a smaller amount of interest and taxes allocated to the rental property. This allows a larger deduction for your other rental expenses.
IRS Pub 527 Dividing Expenses mentions only the IRS method.
Additional information from the Journal of Accountancy: Vacation home rentals and the TCJA
@TomH1959
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