Investment property is purchased with the intent (or hope) of profiting from its sale. Stocks, bonds, collectibles, and land are typical investment properties.
Generally, you don't use investment property in your day-to-day living like you do personal-use property.
Personal-use property is not purchased with the primary intent of making a profit, nor do you use it for business or rental purposes. It includes things like your home, furniture, appliances, personal vehicle, and clothing.
What about a cabin or vacation home?
Good question – it could be both, but think about how you're using it most of the time. If you're using it as a place to relax and do some fishing or skiing, but you're hoping you'll make a few bucks when it comes time to sell (who wouldn't), then it's personal-use property.
On the other hand, if you're renting it out to other vacationers but occasionally pop in for a weekend or holiday, it would be investment property.
Why does it matter?
Although you're supposed to report profits (capital gains) from the sale of both investment and personal-use property, you can only deduct losses that come from the sale of investment property.