Vacation home tax rules you should know

The 14-day rental rule, explained

Published February 2021

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Vacation rental tax rules are complex. That’s because Uncle Sam’s bill depends on how much time you spend renting your home to guests versus using it yourself. Let’s walk through most-asked questions about the primary vacation rental tax rules you should know this year. And keep in mind—we’re not CPAs, so we always recommend working with a professional tax adviser if you’d like to avoid making some new friends at the IRS.


How are short-term rentals taxed?

Short-term rentals are subject to the 14-day rental rule, which determines how much you owe and the tax deductions you can claim.

According to the IRS, your vacation home is classified as a residence (rather than a business) if you use it yourself for more than the greater of:

  • 14 days per year
  • 10% of the total days you rent it to others at a fair rental price

14-day rental rule: The basics

Home type

Minimal-rent residence

Rental property

Medium-rent residence

Heavy-rent residence

Rental status

Rental days ≤ 14

Rental days > 14, personal days ≤ 14

Personal days > 14, OR personal days > 10% of total days home is rented

Personal days > 14, AND personal days ≤ 10% of total days home is rented

Do you pay income tax on rental revenue?

No

Yes

Yes

Yes

Can you write off relevant business expenses?

No

Yes, all

Yes, some

Yes, some

IRS designation

Your home is a personal residence.

Your home is a business

Your home is a personal residence, with a caveat.

Your home is a personal residence, with a caveat.

Tax forms needed

Schedule A

Schedule E or C

Schedule A, E, or C

Schedule A, E, or C

Your home’s tax status changes based on those thresholds. The key thing to know is that whether your home is considered a business—and how many deductions you can make—depends on exactly how long you stay at your vacation home versus rent it to guests.

For example, if you typically rent your home 20 days per month but vacation there for the entirety of August, the IRS will still consider your home a personal residence—with a caveat. That caveat means you may write off certain business expenses, but not all the costs associated with renting.

However, if you take one 10-day family vacation per year at your home and rent the rest of the time, the IRS classifies your home as a business—so you can write off all relevant business expenses.

Each situation requires either Schedule A, E, or C. We recommend working with your tax adviser to pinpoint which information you’ll need to submit to the IRS, along with any tax deductions you may make in your situation.


How do I avoid paying taxes on a rental property?

You’ve probably heard it before. Life’s only certainties are death and taxes—vacation rental income taxes included. How much you pay depends upon the amount of time you use your home personally. But as the chart above suggests, some usage scenarios may not require you to pay income tax on your rental income at all!


Do you have to pay taxes on Vrbo income?

The information Vrbo provides on taxes depends on your situation. Read up about Vrbo tax policies on their website to get the most accurate and up-to-date information.

Learn more about Vrbo and taxes >


How do taxes work with Airbnb?

Like Vrbo, Airbnb has an in-depth FAQ on their tax policies.

Learn more about Airbnb and taxes >

More freedom. Better returns.

Vacation rental management that maximizes your income at tax time—and all the time.

How many days can I use my rental property?

There’s no “wrong” answer here—you can stay at your home as often as you like. But there are tax consequences to the amount of time you spend there.

The IRS sees personal use as the key factor when determining if your home is a residence or a business enterprise. And “personal use” goes beyond a weekend getaway or a family gathering now and then—it also includes instances like:

  • Friends or family members staying rent-free
  • House swaps with other vacation home owners
  • Any other time where a person stays at your home for less than a fair rental price

When you manage with Vacasa, we keep track of how often you’ve stayed at your home —and provide all the information you and your tax professional will need to fill out the right form come filing time.


What are fair rental days on Schedule E?

“Fair rental days” are the number of days your home was actually rented by a party, not the total number of days it was available to rent.

As a supplement to Form 1040, Form Schedule E asks about fair rental days to determine if your property is considered a business or a residence in the eyes of the IRS.


How many days can I rent my property without paying taxes?

The IRS notes that there’s a special rule if you use your home as a residence and rent it for 14 days or fewer per year. In this case, you don't need to report any of the rental income (but you also don’t get to deduct any rental expenses).




Does buying a vacation home help with taxes?

Buying a vacation rental property can be a smart financial decision. A real estate investment that can actively earn you income while building equity seems like a good deal, right?

But let’s be clear: taking on another asset means that you’ll likely pay more in taxes. That said, vacation rentals have access to special tax breaks that ease the burden of ownership and stewardship.

Tax laws around rental income have recently changed, but there are still opportunities to make smart deductions. Up to a limit and within the correct circumstances, vacation rental owners may deduct parts of their mortgage interest rate, interest on home equity loans used for improvements around the house, and property taxes. And don’t forget: your home’s classification under the IRS’s 14-day rule affects what you’re allowed to deduct.

These deductions can be extremely complex. So we advise you to speak to a tax professional to understand if the kind of investment you have in mind will work for your unique financial situation.


Is buying a vacation home a good investment?

We think so! Read up on our vacation rental investment series—or reach out to Vacasa Real Estate to learn more about how we help people buy and sell vacation homes.




A great manager can help make tax time a cinch.

Vacasa’s full-service management makes getting all the information you need around tax time easy. We collect state and local taxes on your behalf, organize your income report, and even document the maintenance work we arrange for your home. And it’s all available, anytime, through your owner account.

See how Vacasa makes renting simple >


Disclaimer: This publication is designed to provide general information regarding the subject matter covered. It is not intended to serve as legal, tax, or other financial advice related to individual situations. Because each individual's legal, tax, and financial situation is different, specific advice should be tailored to the particular circumstances. For this reason, you are advised to consult with your own attorney, CPA, and/or other advisor regarding your specific situation. The information provided here is for your use and convenience only. We have taken reasonable precautions in the preparation of this material and believe that the information presented in this material is accurate as of the date it was written. However, we will assume no responsibility for any errors or omissions. We specifically disclaim any liability resulting from the use or application of the information contained in this publication.

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Vacasa offers property management and other real estate services directly through Vacasa LLC and through Vacasa LLC's licensed subsidiaries. Click here for more information about Vacasa's licensed real estate brokerage/property manager in your state. Vacasa’s licensed real estate brokerages/property managers include: Vacasa Alabama LLC; Vacasa Arizona LLC; Vacasa Delaware LLC, 302-541-8999; Vacasa Florida LLC; Vacasa Louisiana LLC, Dana MacCord, Principal Broker, ph 504.252.0155 (Licensed in LA); Vacasa Michigan LLC, 947-800-5979; Vacasa Missouri LLC, Susan Scanlon, Designated Broker; Vacasa Nevada LLC; Vacasa New Hampshire LLC, P.O. Box 283, Conway NH 03818, Dave Grant, Broker of Record; Vacasa New Mexico LLC, 503-345-9399; Vacasa New York LLC, 888-433-0068, Susan E. Scanlon, Real Estate Broker; Vacasa North Carolina LLC; Vacasa Pennsylvania LLC; Vacasa Real Estate Corporation, California DRE #02105811, Joseph Czapkowicz, California DRE #01380722; Vacation Palm Springs Real Estate, Inc., California DRE #01523013, Joseph Czapkowicz, California DRE #01380722; Vacasa Real Estate LLC (licensed in Colorado, Daned Kirkham); Vacasa Real Estate LLC (licensed in Idaho and Oregon); Vacasa Real Estate LLC (licensed in Tennessee, 615-671-9916); Vacasa Real Estate LLC (licensed in Texas, Debra Brock, Designated Broker); Vacasa Real Estate LLC (licensed in Washington, Robert Brush, Designated Broker); Vacasa South Carolina LLC; Vacasa Tennessee LLC; Vacasa Vacation Rentals of Hawaii LLC, 3350 Lower Honoapiilani Road, Suite 600, Lahaina, HI 96761; Vacasa Vacation Rentals of Montana LLC, Patrice Tompkins, Licensed Property Manager; Vacasa Virginia LLC; Vacasa Wisconsin LLC; Vacasa Wyoming LLC. In Canada, this advertisement is provided by Vacasa Canada ULC, CPBC lic. number 75826, 172 Asher Rd. V1X 3H6 Kelowna, BC.

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