Katy owns a second home. During the year, she used the home for 20 personal-use days and 50 rental days. Katy allocates expenses associated with the home between rental use and personal use. Katy did not incur any expenses to obtain tenants. Which of the following statements is correct regarding the tax treatment of Katy's income and expenses from the home?

Question

Quizplus · Accepted Answer

A) This is correct as Katy must include the rental receipts in her gross income and can deduct the expenses allocated to the rental use of the home for AGI.
B) This is also correct as Katy can deduct interest expense and property taxes associated with the home not allocated to the rental use of the home from her AGI.
C) This is also correct as if her rental receipts exceed her deductible expenses (including the expenses for personal use days allocated to the rental use), she may not report a loss from the rental property. 
Therefore, all three choices are correct.

Katy Owns a Second Home