Renting out your Orlando vacation home, condo or villa will not only help offset some of the costs of second home ownership but the U.S. Tax Code also provides some pretty decent breaks.
1.) If you rent your home for 14 days or less in a given year, you don’t have to pay any tax on the rental income. You don’t even have to report the income to the IRS. This break also applies if you rent your primary home for 14 days or less, which means if you’re going out of town for 2 weeks and want to rent out your home and make a little extra cash, you don’t have to worry about reporting it on your tax return.
2.) If you rent out your Orlando vacation home for more than 2 weeks, then you should report the income on “Schedule E” but you’ll still be permitted to deduct expenses such as utilities, property management fees and even depreciation. You’ll have to pro-rate those expenses based on the number of days that you used the home for personal reasons versus the number of days you rented it out. Good news: the days you allow friends or relatives to use your home don’t count as personal days (provided you’re not charging them of course). Days when the home is vacant also don’t count.
The amount you can deduct in rental expenses also depends on how much time you spend in the vacation home during a calendar year.
– If you use the home for more than 14 days or 10% of the days you rent it (which ever is greater), then your home is considered a residence and your deductions can’t exceed your gross rental income.
– If you use the home for fewer than 15 days or 10% of the days you rented it out (which ever is greater), then your home is considered an “investment property”. Now your deductions can exceed your gross rental income.
That’s it in a nutshell- although you may have to read it twice before it makes sense. There are some “passive loss” rules that might modify these guidelines – and of course all of the above should be discussed and verified with a tax professional. I’m just a Realtor… blah… disclaimer… don’t-sue-me blah…