Lester rents his vacation home for 6 months and lives in the home during the other 6 months of 2019. The gross rental income from the home is $4,500. For the entire year, real estate taxes are $800, interest is $3,000, utilities and maintenance expenses are $2,200, and depreciation expense on the entire home would be $4,000. What is Lester's allowable net loss from renting his vacation home?

Question

Quizplus · Accepted Answer

Since Lester used the home for personal purposes for more than the greater of 14 days or 10% of the total days it was rented, the vacation home is considered a residence. Expenses must be allocated between rental and personal use. The rental expenses cannot generate a loss but can only be used to offset rental income. After allocating expenses between personal and rental use, if there's a net rental income, it is taxable. If there's a net loss, it is not deductible. Given the information, Lester cannot claim a loss for the rental portion beyond reducing the rental income to zero.

Lester Rents His Vacation Home for 6 Months and Lives