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Vacation home planning can cut your taxes

Filed Under: Taxes on July 07, 2010

You can enjoy a vacation home and cut your taxes - with
some careful planning and a little discipline.

The IRS rules can be complex and potentially restrictive,
so a word of caution is in order as you plan the use of
your vacation home.

Owners of vacation homes often rent out the property
when they’re not using it themselves. Renting out your
vacation home may or may not make sense for you. The
principal variables are the number of days you rent the
property, the number of days of personal use, your
individual tax situation, and your personal wishes for
the use of your vacation home.

RENT FOR 14 DAYS OR LESS and a simple tax break is
available. If you rent your vacation home for 14 days
or less, all of the rental income is tax-free. This
attractive tax benefit can help provide cash for your
mortgage and other expenses.

RENT FOR MORE THAN 14 DAYS and your tax planning and
personal life become more complex. If you rent your
vacation home for more than 14 days, all your rental
income is reportable. Whether you treat the income and
expenses as a second residence or as rental property
depends on the personal use of your vacation home
relative to the time the home is rented out. This test
is made annually and determines the nature of deductions
and the tax treatment if the vacation home is sold.

Please call us to guide you through the IRS rules to
find the rental strategy that meets your financial goals
yet ensures the personal enjoyment of your vacation home.

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