Vacation Home Rules
How many days you use a vacation home yourself decides how its rental income is taxed. Rent it 14 days or fewer and the rent is tax-free. Use it more than 14 days, or more than 10% of rented days, and it is treated as a residence: rental deductions are capped at rental income, so no loss. Get the count right and the same home can pay its own way with little or no tax.
Reviewed by Ebot Mbi, CPA, EA · Last reviewed October 9, 2026
Who it fits
- Owners of a lake house, beach condo or cabin who rent it part of the year
- Homeowners near major events who rent their home for a week or two
- Owners deciding how many personal days to keep before a season starts
- Families who let relatives use a second home
Who it's not for
- Full-time rentals with no personal use, which follow ordinary rental rules
- Owners who want to deduct a rental loss but also use the home heavily themselves
- Owners of short-term rentals who materially participate, where different passive rules apply
How it works
Under 15 days: if you rent a home you also use as a residence for 14 days or fewer in the year, the rent is not reported and rental expenses are not deducted. Mortgage interest and property taxes stay deductible as usual if you itemize.
The personal use test: the home is a residence if your personal use exceeds the greater of 14 days or 10% of the days rented at fair rent. Personal use includes days used by you, family members, and anyone paying less than fair rent. Days spent mainly on repairs do not count.
If the home is a residence and rented 15 days or more, expenses are split between rental and personal use by days. Rental deductions are then limited to rental income and taken in order: the rental share of interest and taxes first, then operating costs, then depreciation. Any excess carries forward to the next year.
If personal use stays at or under the limit, the home is a rental. A loss is possible, subject to the passive activity rules and, for active participants, the $25,000 allowance.
Counting is the strategy. Track every day: rented, personal and maintenance.
Illustrative example
Illustrative: a lake house rented 120 days at $300 a night and used by the owners 30 days. Mortgage interest and property tax total $15,000; operating costs $20,000; full-year depreciation would be $12,000.
- Personal use limit: greater of 14 days or 10% x 120 = 12 days, so 14 days; 30 days used, so it is a residence
- Rental share of use: 120 / (120 + 30) = 80%
- Rent: 120 x $300 = $36,000
- Less rental share of interest and taxes: $15,000 x 80% = $12,000, leaving $24,000
- Less rental share of operating costs: $20,000 x 80% = $16,000, leaving $8,000
- Depreciation allowed: $12,000 x 80% = $9,600, limited to $8,000; $1,600 carried forward
- Net taxable rental income: $0
$36,000 of rent received with $0 of net taxable rental income, and $1,600 of depreciation carried to next year.
The rules
| Rule | Citation |
|---|---|
| A dwelling is a residence if personal use exceeds the greater of 14 days or 10% of fair-rental days. | IRC §280A(d)(1) |
| Personal use includes use by family members and by anyone paying less than fair rent. | IRC §280A(d)(2) |
| Rental of a residence for fewer than 15 days is excluded from income, and rental deductions are not allowed. | IRC §280A(g) |
| Expenses are allocated by rental days over total days of use. | IRC §280A(e) |
| Rental deductions on a residence are limited to rental income, with the excess carried forward. | IRC §280A(c)(5) |
Watch-outs
- A relative's free weekend counts as your personal day. So does a discounted rate to a friend.
- Keep a day-by-day log with booking platform records. Without it, the count is your word against the examiner's.
- Depreciation you take reduces basis and is taxed when you sell, even if it only offset rental income.
- Interest and property tax on the personal share can be itemized, subject to the cap on state and local taxes.
What we do
We review your calendar before the season and tell you how many personal days you can use under each outcome. At year-end we allocate expenses, apply the ordering rules, track carryforwards and depreciation, and file Schedule E.
Questions
Is the 14-day tax-free rental per property?
It applies to each dwelling you use as a residence. Rent it 14 days or fewer in the year and the rent is excluded.
Do days I spend fixing the place count as personal use?
Not if you are working substantially full time on repairs and maintenance that day, even if family members are there.
Can I deduct a loss on my vacation home?
Only if it is not treated as a residence, meaning personal use stays within the limit, and then subject to the passive loss rules.