Most likely, yes it is due to the vacation home loss limitation. If you have a vacation home, and you use it for personal purposes for more than the greater of these:
- 14 days
- 10% of the total number of days you rent the home at fair rental value
Then your vacation home qualifies as a personal residence, and the vacation-home rules apply. These rules limit deductible expenses to rental income. Deductions are allowed in the following order and to the following extent:
1. Tier 1: The rental portion of deductions that are allowed without regard to rental use, such as the deductions for property taxes, qualifying home mortgage interest, and casualty losses are deductible as rental expenses to the extent of the gross rental income from the unit.
2. Tier 2: The allocable rental expenses directly related to the rental property itself, including advertising, commissions, Insurance, repairs, and utilities are deductible to the extent that they exceed gross rental income reduced by the first-tier expenses.
3. Tier 3: Allocable depreciation and other amounts that result in an adjustment to basis are allowed to the extent that they exceed gross rental income reduced by the first and
second-tier expenses.
Little or no allowable depreciation is common with vacation rentals. For more information, and a Worksheet for Figuring Rental Deductions for a Dwelling Unit Used as a Home, go to:
IRS Publication 527 - Reporting Income and Deductions
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