Expenses for a short-term rental

[laura5055129]

If I have a short-term rental that I use for less than 14 days per year, primarily treating it as an investment property, do I still need to allocate a portion of the expenses (taxes, insurance, mortgage interest, utilities, maintenance) to personal use, and that portion then non-deductible for the business?

[DianeW777]

No. You have a special advantage because it was rented less than 14 days last year.

• Minimal rental use: There's a special rule if you use a dwelling unit as a residence and rent it for fewer than 15 days. In this case, don't report any of the rental income and don't deduct any expenses as rental expenses.

[laura5055129]

I use the property less than 14 days per year.  The property is used as a short-term rental for over 100 days per year.  It is used mostly as an investment property.

[DawnC]

How many days of personal use do you have?   If you rented it for 100 days, 10% of that is 10 days.   So if your personal use is more than 10 days, you have mixed use property and can't deduct losses.   You're considered to use a dwelling unit as a residence if you use it for personal purposes during the tax year for a number of days that’s more than the greater of:

1. 14 days, or
2. 10% of the total days you rent it to others at a fair rental price.

For example, if you live in your main home for 11 months, your home is a dwelling unit used as a residence. If you live in your vacation home for the other 30 days of the year, your vacation home is also a dwelling unit used as a residence unless you rent your vacation home to others at a fair rental value for more than 300 days during the year in this example.   Topic 415

If you use the dwelling unit for both rental and personal purposes, you generally must divide your total expenses between the rental use and the personal use based on the number of days used for each purpose. You won't be able to deduct your rental expense in excess of the gross rental income limitation. 

[laura5055129]

I used the property for only 7 days during the year.

[DawnC]

Then you can deduct rental expenses in excess of rental income - since 7 days is less than 14 days and less than 10% of your rental days.   

[laura5055129]

I thought, based on Publication 527, that I still needed to allocate expenses between personal and business use, with the expenses allocated to personal use being non-deductible.

[AmeliesUncle]

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@laura5055129 wrote:

I thought, based on Publication 527, that I still needed to allocate expenses between personal and business use, with the expenses allocated to personal use being non-deductible.

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You are correct (except the personal portion of mortgage interest and real estate tax are Itemized deductions).  The other answers that are saying otherwise are wrong.

However, the program should do that automatically for you when you enter the number of days it was rented and the number of your personal days.

[DawnC]

From Topic 415 - If you use the dwelling unit for both rental and personal purposes, you generally must divide your total expenses between the rental use and the personal use based on the number of days used for each purpose.  You won't be able to deduct your rental expense in excess of the gross rental income limitation (your gross rental income less the rental portion of mortgage interest, real estate taxes, casualty losses, and rental expenses like realtors' fees and advertising costs). 

However, you may be able to carry forward some of these rental expenses to the next year, subject to the gross rental income limitation for that year. If you itemize your deductions on Schedule A, you may still be able to deduct your personal portion of mortgage interest, property taxes, and casualty losses from federally declared disasters on that schedule.