Vacation property owners often need to take steps to protect their investments and minimize their taxes. When you’re a vacation homeowner, there are many tax tips that you should be aware of. If you own a vacation property and are thinking about selling, this is the post for you! This blog will provide tips on how to get your home ready for sale. We will also provide information on what to do once it’s sold.

Nima Bendavood: Your vacation home can be classified as a personal residence or rental property depending on the occupancy. IRS rule of thumb is that your vacation home is considered a rental property if You rent it out for more than 14 days during the year and Personal use during the year does not exceed the greater of: (1) 14 days or (2) 10% of the days you rent the home out at fair market rates.

Keep record:

When you sell your vacation home, it’s important to understand that you keep good records so that you can accurately report any capital gains or losses from these transactions. A vacation rental can be treated in the same fashion as a rental investment property with annual income and expenses as well as capital gain and losses when it comes the time to sell.

Understand occupancy taxes:

Nima Bendavood: Owners of California short term rental properties are expected to pay transient occupancy tax (TOT). There is no universal TOT rate as it varies between counties and cities. In most cases the transient occupancy tax rate ranges from 6% to 14%. This tax is levied on the listing price including cleaning fees and any other relevant fees.

Use Tax Cuts:

When it comes to taxes and your vacation property, you can use the same strategies that are used for other types of investments. You can also take advantage of tax breaks and deductions, but there are some things to consider before you do so. In general, vacation homes can provide significant tax savings and deductions if used as a rental investment.

Report income as required:

As a vacation property owner, you are required to declare your rental income on your tax return. You can deduct the expenses of operating and maintaining the property from this income. If you do not report the income, then you may be subject to penalties and interest charges when filing your taxes.

Keep location in your mind:

Nima Bendavood: Real estate investors who have net rental income from a property located in another state need to file a non-resident return and also pay tax to the state the property is located in. The rental income also must be included on the resident state tax return, as well as the federal income tax return.

Originally Posted: https://medium.com/@nimabendavood/essential-tax-tips-for-vacation-property-owners-4b0486c4d7f6