Personal use of vacation homes and renting part of a residence is one of the most complicated rental scenario that require careful attention to IRS rules and regulations.
The tax picture gets more complicated when in the same year you make personal use of your vacation home and rent it out for more than 14 days.
The key to maximizing deductions is keeping annual personal use of your vacation home to fewer than 15 days or 10% of the total rental days, whichever is greater.
To avoid going over the 10% limit, essentially you shouldn’t use your vacation home more than one day for every 10 days you rent it.
If you exceed the maximum, some deductions are limited; those related to the rental of the property are again limited by the ratio of actual rental days to the total days of use.
If you are limited to using deductions only up to the amount of rental income, you must use the deductions allocated to the rental portion in the following order: (1) interest and taxes, (2) operating costs, (3) depreciation.
First you deduct the allocated real estate taxes, mortgage interest, and casualty loss and direct expenses.If the total of these deductions equals or exceeds the gross rental income then you must stop here. No other deductions are allowed..
If the total of these deductions is less than the gross rental income you next deduct allocated "operating expenses", such as insurance and utilities - up to the remaining amount of gross rental income..
If there is any gross rental income remaining after deducting these two types of expenses then, and only then, can you deduct depreciation.
Personal Use of Dwelling Unit (Including Vacation Home)
https://www.irs.gov/publications/p527/ch05.html
Worksheet 5-1.Worksheet for Figuring Rental Deductions for a Dwelling Unit Used as a Home
