Are Vacation Homes a Tax Shelter?

family walks towards beach and sunset
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If you or your clients own a cottage by the beach or a cabin in the woods, you might rent out the place to tenants in the summer when you’re not using it.

The thinking here is that can defray the usual ownership costs and you might turn a tidy profit. Conversely, if you show a loss for the year, the loss may offset other high-taxed income, like wages from your job.

But the tax rules for vacation home rentals are tricky. Significantly, if your personal use exceeds certain tax law limits, you can’t deduct a loss for the year.

Let’s start with this basic tax premise. Naturally, rental income from a vacation home is taxable, but you can deduct expenses such as mortgage interest, property taxes, repairs, utilities, insurance and so on. (Depending on your situation, mortgage interest and property may otherwise be wholly or partially deductible on your personal return for a qualified residence.) 

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About Ken Berry

Ken Berry

Ken Berry, Esq., is a nationally known writer and editor specializing in tax, financial, and legal matters. During his long career, he has served as managing editor of a publisher of content-based marketing tools and vice president of an online continuing education company. As a freelance writer, Ken has authored thousands of articles for a wide variety of newsletters, magazines, and other periodicals.           


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