Ask The Taxgirl: Vacation Rentals

Taxpayer asks:

I have a question. I have been reading that you can deduct the cost of vacation homes or second homes. Each summer, our family rents out a beach home. Can we deduct this on our taxes?

(I love your site – you’re very funny!)

Taxgirl says:

Thanks for the nice compliment about the site. I try to be as entertaining as possible so that tax doesn’t seem so intimidating and boring.

But you’re not going to like me as much when you hear the answer to your question: it’s no. You can’t deduct the cost of vacation rentals on your taxes.

What you’ve been hearing about vacation and second homes applies to folks who own those homes. Briefly, you can generally deduct property taxes for these homes in addition to your principal residence. Additionally, you can deduct interest on up to $1 million of mortgage debt on two personal residences, so the mortgage interest may also be deductible based upon your circumstances.

(NOTE: Post-TCJA, there are some changes to the deductibility of mortgages and real estate taxes. Check here for more.)

Expenses associated with the maintenance of the property are only deductible if you rent the property out for part of the year… But that’s another post for later!

Enjoy your vacation this summer, even if it’s not deductible!