POTENTIAL INCOME WITHOUT THE INCOME TAX

If you own a summer home or vacation property, you can rent it out tax-free for up to two weeks each year. You do not have to pay tax on the rental income.

If a property is rented for less than 15 days, the rent you receive does not have to be reported as income on your income tax return. If you itemize your deductions, you can still deduct all of the mortgage interest and real estate taxes related to the property. But you are not entitled to other deductions like repairs, utilities and depreciation.

Once the number of rental days reaches 15 or more, the property is considered "rental property." At that point, you must report the rental income. You then become eligible for additional rental deductions.

However, your deductions may be limited if you use the property personally for more than 14 days or more than 10 percent of the number of rental days. Your deductions also may be limited if they exceed the annual rental income.

Read more in IRS Publication 527, Residential Rental Property (Including Rental of Vacation Homes).

 
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