Owning a vacation home is a dream for many people. If you're a homeowner who wants to buy a home at the beach that you can visit anytime you want, you're probably wondering what you'll do with it when you're not using it. Many people have found that they can rent it out.
If you're unsure if your second home can be used as such a business, consult with a business attorney. If you are able to rent it out, your second home can create an additional income. There are also some tax benefits to renting your vacation property out, and this guide explains just a few of the deductions you can claim on your federal income taxes:
Nobody will know that your vacation home is available for rent unless you tell them. The best way to tell them is to advertise, and this costs money. Because you're renting out your second home for income, the Internal Revenue Service (IRS) expects you pay taxes on the income, under certain conditions, but you'll have the ability to deduct the following advertising expenses:
Cleaning and Repair Expenses
After each renter leaves to go home, you'll need someone to come in and professionally clean the entire home so that it is ready for the next guests. Professional cleaning services can cost a lot of money, but this cost is 100 percent deductible from the rental payments you receive as a cost of doing business.
As with any other home, appliances are bound to break down, a leak in the ceiling might occur or something else can go wrong. If you pay professionals to make these repairs, these expenses are deductible from your income taxes because you're using the property as a rental property.
When people rent a vacation home, they use the utilities that you have to pay for. The following utilities are deductible, but only for the time in which you had a renter in the home:
- cable/satellite TV
Consideration: Any utility bills that you incur while you are staying at the property are not tax deductible. Additionally, consult with your attorney to determine whether any utilities are deductible during weeks or months that the home is empty.
If you're hoping to rent out your villa, condo or home on the beach, but don't want the hassle of keeping track of all the expenses, hire a professional property management company. Their job is to keep track of this for you.
In addition to keeping track of expenses, they take care of renting the property out, cleaning, repairs, maintenance, and paying all the bills. You pay them a fee and they take it from there. The best part about a property management company is that their fee is also tax deductible.
Rent out your second home so that it can work for you, instead of just sitting empty for the majority of the year. Because the IRS considers this a type of business, consult with a business attorney to learn more about what you can do with the property, to keep yourself out of legal hot water. Keep in mind that you do not have to keep any records or report any earnings on rental income if you only rent out the home for two weeks or less out of the year.
To learn more, contact a business law professional for help.