These rules apply to short term rentals. The facts and circumstances of each situation determine if you have a rental property or a short-term rental business. This also determines how the income is taxed and what expenses are deductible.
A dwelling unit is a residence if the taxpayer uses it for personal purposes for more than the greater of 14 days, or 10% of the total days it is rented to others at a fair rental price [I.R.C. § 280A(d)].
If the taxpayer uses a dwelling unit for personal purposes, but not as a residence, he or she must report all the rental income and divide expenses between the rental use and the personal use.
For a residence, the expenses allocated to rental use may offset, but not exceed, the gross income from the property. Gross income is calculated by reducing gross receipts by expenditures to obtain tenants for the unit, such as advertising and management fees.
Renting Residential and Vacation Property
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