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Home › Articles › Money Management › Brilliant Deductions for Vacation Homes

Brilliant Deductions for Vacation Homes

Everything Second Homeowners Need to Know about Saving on Their Taxes

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Where to Start
Whether your vacation rental home was profitable or not, you'll surely have many deductions that can be applied to help offset your rental income. Karpinski offers the following list of things you should gather and consider when preparing your income taxes:

Figure out your gross rental revenue. Your gross rental revenue would be all monies collected from renters (and kept). This includes the following:

  • Base rental rate
  • Cleaning fees
  • Parking fees
  • Amenity fees
  • Pet fees
  • Any portion of a security deposit that you keep

(Note that gross rental revenue does not include monies that you return to the renter upon departure, such as refunded deposits, refunded pet deposits and sales taxes collected and paid to your local or state sales tax office.)

"To calculate the base rental rate that a guest paid, divide the total that the renter paid by the tax rate in decimal format (the percentage divided by 100) plus one," Karpinski says. "For example, say you billed your renter for $1,672.50 but cannot remember the base rental rate that you charged (pre-tax). If your sales tax rate is 11.5 percent, take the $1,672.50 and divide it by 1.1150 (your sales tax rate converted to a decimal plus one) and you will come up with $1,500, which is the base rental rate."

Know which costs can be deducted or amortized. Deductions can be made in many of the areas associated with renting out your vacation home. Take a look at the deductions checklist below to make sure you don't miss out on any possible deductions. The best way to use the checklist? Gather up the documents you have for all of the information listed below and provide them to your tax professional, who can determine what is deductible in your situation:

Mortgage, Taxes and Insurance