If you own a condominium, cottage, cabin, lake or beach home, ski lodge, or similar property that you rent for an “average” rental period of seven days or less for the year, you have a property with unique tax attributes.
Seven days example. Say you have a beach home and you rent it 15 times during the year, for a total of 85 days. What is your average rental. Is it an average of seven days?
The right type of beach home or vacation cottage can produce great tax results when the average rental period is within our seven days example. But it’s tricky because when the average rental period is within our seven days example, the property is not a rental property as defined by the tax code. Instead, the property is a commercial hotel type property that you report on Schedule C of your tax return.
However, If you have a profit on the rental you likely will qualify for the 20% deduction, depending on your tax filing strategy.
The tax law has also imposed restriction on a loss of $20,000 for the year, in which you likely have only two ways to take advantage of this tax strategy.
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Spencer Accounting Group, LLC does not provide investment, tax, legal, or retirement advice or recommendations in these blogs. The information presented here is not specific to any individual's personal circumstances.
Keana Spencer is an Accountant, Entrepreneur, and Educator to her clients, with a strong passion. Keana has over 10 years of experience and through her practice, she is a source of knowledge and strategies to her clients.