Tax Implications of Renting Your Home

Tax Implications of Renting Your Home

Tax Implications of Renting Your HomeHaving a second home is an ideal getaway option for many homeowners. However, as your daily life doesn’t allow you to escape quite that often, you might have already considered renting out the home until you want to visit. But, before you file your taxes this coming year, be sure to understand the tax implications of renting a vacation home that is not your primary residence. Even more importantly, secure your investment with a custom tailored Dayville Home Insurance policy.

Second home as full time rental.

 
If you limit your personal use of your second home to 14 days or fewer, or 10% of the time it’s rented, you’ve essentially turned your second home into an investment – “More than half of the people who finance their vacation homes are able to cover 75% or more of their mortgage by renting it out to travelers,” says Jon Gray, chief revenue officer at HomeAway, an online vacation rental marketplace based in Austin, Texas, explains to Bankrate.

Short-term home rentals.

 
This is by far the most advantageous for vacation home owners. If you home is rented for 14 days or fewer in a row, the IRS is not entitled to a dime of your earnings. Income from these stays does not have to be reported, but instead can be pocketed by you!

Hybrid home tax implications.

 
If you rent out your vacation home and use it frequently yourself throughout the year, taxes get a bit trickier. To reduce taxes on any rent you collect, you’ll want to deduct eligible expenses. But because the home has shared personal and rental use, you must allocate the costs.

For example, you spent 60 days last year during ski season at your mountain cabin. The hillside hideaway was rented for 180 days the rest of the year. You can deduct 75% of your vacation home’s qualifying rental expenses against rent you collect: 180 rental days divided by 240 total days of property use, explains Bankrate.

Local taxes.

 
Depending on your exact location, your state laws will vary. However, most states require some sort of local tax that homeowners must pay. While, historically, these taxes have been difficult to prove and collect, new technology is making these rentals easily traceable.
 

About Byrnes Agency

Renting your home can be a profitable and fun venture. However, ensuring you have CT homeowners insurance coverage from Byrnes Agency is essential to protect your property during the process. For more information on a customized insurance plan, contact one of our specialists today at one of our three locations.

Dayville Office

Phone: (860) 774-8549
394 Lake Rd
Dayville, CT 06241
United States
info@byrnesagency.com
Hours of Operation: Monday- Friday 9:00am-5:00pm

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Norwich Office

Phone: (860) 886-5498
6 Consumers Avenue
Norwich, CT 06360
United States
info@byrnesagency.com
Hours of Operation: Monday- Friday 9:00am-5:00pm

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Woodstock Office

Phone: (860) 928-7928
1226 Connecticut 169
Woodstock, CT 06281
United States
info@byrnesagency.com
Hours of Operation: Monday- Friday 9:00am-5:00pm

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