[LiverpoolWalrus]

I couldn't find an answer on the IRS website, so I thought I'd come here.

Let's say you own a rental property that you live in 1/4 of the year (3 months). It was marketed for rent all of 2020 but you received zero income in 2020 because of the pandemic. You lived in it for three months. Is it a rental property or a second home?

Are tax deductions like repair and maintenance allowed in both cases (rental property and second home)? I'm aware the deduction has to be the same proportion as the number of rental days.

And what's most important as I bought the property in January 2020 --- are expenses like furniture, decorations and housewares deductible? Are they only deductible if it's considered a rental property and not a second home, or both, or neither?

Thanks!

[Bass56]

I used turbo tax home and business for my property. It guides you through the whole process. Has a help line if you have any questions.
I reccomend using a professional your first time , especially under these covid times. Good luck.

[Stu from NYC]

Originally Posted by LiverpoolWalrus

I couldn't find an answer on the IRS website, so I thought I'd come here.

Let's say you own a rental property that you live in 1/4 of the year (3 months). It was marketed for rent all of 2020 but you received zero income in 2020 because of the pandemic. You lived in it for three months. Is it a rental property or a second home?

Are tax deductions like repair and maintenance allowed in both cases (rental property and second home)? I'm aware the deduction has to be the same proportion as the number of rental days.

And what's most important as I bought the property in January 2020 --- are expenses like furniture, decorations and housewares deductible? Are they only deductible if it's considered a rental property and not a second home, or both, or neither?

Thanks!

A lot of changes last year due to the pandemic. Taxes are normally way over complicated but now forgettaboutit.

Suggest talking to professional.

[retiredguy123]

I agree with using TurboTax or asking a professional for this situation. But, the IRS website says:

"A dwelling is considered a residence if it’s used for personal purposes during the tax year for more than the greater of 14 days or 10 percent of the total days rented to others at a fair rental value."

Also, the only expenses that would normally be deductible for a residence are mortgage interest and real estate taxes. The other expenses you mentioned would not be deductible.

[karostay]

I use a CPA for all my tax advice not TOTV

[dewilson58]

Originally Posted by karostay

I use a CPA for all my tax advice not TOTV

[Papa_lecki]

5 IRS Rules for Renting Out Your Vacation Home | Kiplinger

3. If you use the place for more than 14 days or more than 10% of the number of days it is rented -- whichever is greater -- it is considered a personal residence. You can deduct rental expenses up to the level of rental income. But you can't deduct losses.

[LiverpoolWalrus]

Thanks for all the responses. I should have said that yes of course I’ll be getting professional advice in a few weeks. I was asking for this information because it’ll make it easier for me to tally only the numbers that are relevant. There’s no sense in adding up costs in my records that aren’t deductible.

But I appreciate the consistency in the let’s say “tone” of TOTV responses!

[Fredman]

Originally Posted by Papa_lecki

5 IRS Rules for Renting Out Your Vacation Home | Kiplinger

3. If you use the place for more than 14 days or more than 10% of the number of days it is rented -- whichever is greater -- it is considered a personal residence. You can deduct rental expenses up to the level of rental income. But you can't deduct losses.

Agree

[CoachKandSportsguy]

yes, TOTV has good answers, and depends upon your level of understanding of financial statements. First, if the house is exclusively for rental, then using a commercial mortgage, a commercial insurance policy and an LLC is the best way to file as a commercial entity and then post tax loss carryforwards.

Second, no one is watching you as far as personal days in the house. However, if you have any sort of insurance claim while using it personally, then you are opening up yourself to fraud claims.

We have our rental house in an LLC, commercial mortgage, commercial insurance and filing a partnership using Turbo Tax Business, not the same as home and business. Had to use it to file my dad's 1041 estate trusts every year since 2015. . distributions to my mom using K1s, same as LLC partnership to our income taxes.

but its not complicated, just do it in turbo tax business and then take it to a CPA and have him/her review it. . . instead of do it.

finance and tax guy.

I can give you a number to call on the air of a CPA who will answer your questions live on the air.

[DIver0258]

Originally Posted by CoachKandSportsguy

yes, TOTV has good answers, and depends upon your level of understanding of financial statements. First, if the house is exclusively for rental, then using a commercial mortgage, a commercial insurance policy and an LLC is the best way to file as a commercial entity and then post tax loss carryforwards.

Second, no one is watching you as far as personal days in the house. However, if you have any sort of insurance claim while using it personally, then you are opening up yourself to fraud claims.

We have our rental house in an LLC, commercial mortgage, commercial insurance and filing a partnership using Turbo Tax Business, not the same as home and business. Had to use it to file my dad's 1041 estate trusts every year since 2015. . distributions to my mom using K1s, same as LLC partnership to our income taxes.

but its not complicated, just do it in turbo tax business and then take it to a CPA and have him/her review it. . . instead of do it.

finance and tax guy.

I can give you a number to call on the air of a CPA who will answer your questions live on the air.

This response is why we use a CPA. Tax language is greek to us. We were in a similar situation in 2020. We totaled everything up and gave all of the info to our CPA and let her decide which deductions we could use and which ones were not applicable. We would much rather have my taxes prepared by someone that knows and is current on tax code.

[Singerlady]

Originally Posted by LiverpoolWalrus

Thanks for all the responses. I should have said that yes of course I’ll be getting professional advice in a few weeks. I was asking for this information because it’ll make it easier for me to tally only the numbers that are relevant. There’s no sense in adding up costs in my records that aren’t deductible.

But I appreciate the consistency in the let’s say “tone” of TOTV responses!

Use Quicken to track expenses. Easy peasy for you and accountant.

[Laurawilcox]

I was surprised as well of the limited number of days you can use your property if a second home. Officially anyway. We were asking the same question. Will definitely make second home investment a rental. Determine your goal for it as it will start carrying the advantages of depreciation, etc., that may need to be recovered later dependent on your plan. Do you need the tax breaks to have the obligations?

[LiverpoolWalrus]

Originally Posted by Laurawilcox...

Do you need the tax breaks to have the obligations?

Thanks Laura. I’m fortunate that I don’t “need” tax breaks. Just gathering Information.

[Mqtsnowdean]

You might want to check IRS Publication 527.