Rental property

[flyrsphl27]

If we buy a second home, use it for only 14 days, rent it out for the summer, and then close it down for the winter, could we still consider it an investment property for the entire year even though it was not available for rent over the winter considering we were not using it either?

[Critter]

You will have a rental property that will be taxed under the Vacation Home Rules for every year you rent the property out. 

https://www.irs.gov/uac/newsroom/renting-your-vacation-home-1

[flyrsphl27]

Thanks! So just to clarify, assuming we stay there for 14 personal days, the entire mortgage insurance, taxes, etc for the year are entirely deductible even if over the winter the house is not used for rentals?
Another scenario - What is we use the house for 20 days and it is rented for 90 days, do we allocate everything based on 110 days or 365 days??  Thanks again everything just seems a tad gray!

[TaxGuyBill]

Yes, in both scenarios the mortgage interest and real estate taxes are fully deductible.

However, the expenses are divided between personal days and rental days.  So 20/110ths would go on Schedule A as an Itemized deduction (subject to the usual limitations), and 90/110ths would go on Schedule E as a rental deduction.  That method is used for both of your scenarios.

The only difference in your first scenario from your second scenario is that if your rental on Schedule E shows a loss, the loss is not allowed (except for mortgage interest and real estate taxes) and any additional deductions permanently disappear for the first scenario.  In the second scenario, the losses may be used (or if your income is too high, carried over).

[Critter]

Also make sure you list the property as an asset and depreciate it ... it is required, it is not an option.

[TaxGuyBill]

I should also clarify that you don't need to do the dividing.  When you enter the days into TurboTax, it will do the math and put the proper deductions where it needs to be.

[Critter]

Yes, follow the interview screens then carefully review the Sch E & the Sch E worksheets BEFORE you file the return for accuracy.