Personal Use of Vacation Home or Dwelling Unit If you have any personal use of a vacation home or other dwellingunit that you rent out, you must divide your expenses between rentaluse and personal use. See Figuring Days of Personal Use andHow To Divide Expenses, later. If your expenses for rentaluse are more than your rental income, you may not be able to deductall of the rental expenses. See How To Figure Rental Income andDeductions, later. Exception for minimal rental use.If you use the dwelling unit as a home and you rent it for fewerthan 15 days during the year, do not include any of the rent in yourincome and do not deduct any of the rental expenses. See DwellingUnit Used as Home, later. Dwelling unit. The rules in this section apply to vacation homes and otherdwelling units. A dwelling unit includes a house, apartment,condominium, mobile home, boat, or similar property. A dwelling unithas basic living accommodations, such as sleeping space, a toilet, andcooking facilities. A dwelling unit does not include property usedsolely as a hotel, motel, inn, or similar establishment. Property is used solely as a hotel, motel, inn, or similarestablishment if it is regularly available for occupancy by payingcustomers and is not used by an owner as a home during the year. Example.You rent out a room in your home that is always available forshort-term occupancy by paying customers. You do not use the roomyourself and you allow only paying customers to use the room. The roomis used solely as a hotel, motel, inn, or similar establishment and isnot a dwelling unit. Dwelling Unit Used as Home The tax treatment of rental income and expenses for a dwelling unitthat you also use for personal purposes depends on whether you use itas a home. (See How To Figure Rental Income and Deductions,later). You use a dwelling unit as a home during the tax year if you use itfor personal purposes more than the greater of: 14 days, or 10% of the total days it is rented to others at a fairrental price. See Figuring Days of Personal Use, later. If a dwelling unit is used for personal purposes on a day it isrented at a fair rental price, do not count that day as a day ofrental use in applying (2) above. Instead, count it as a day ofpersonal use in applying both (1) and (2) above. This rule does notapply when dividing expenses between rental and personal use. Fair rental price.A fair rental price for your property generally is an amount that aperson who is not related to you would be willing to pay. The rent youcharge is not a fair rental price if it is substantially less than therents charged for other properties that are similar to your property. Ask yourself the following questions when comparing anotherproperty with yours. Is it used for the same purpose? Is it approximately the same size? luxury hotels in AveiroIs it in approximately the same condition? Does it have similar furnishings? Is it in a similar location? If any of the answers are no, the properties probably are notsimilar. Examples The following examples show how to determine whether you used yourrental property as a home. Example 1.You converted the basement of your home into an apartment with abedroom, a bathroom, and a small kitchen. You rented the apartment ata fair rental price to college students during the regular schoolyear. You rented to them on a 9-month (273 days) lease. During the summer, your brothers stayed with you for a month (30days) and lived in the apartment rent free. Your basement apartment was used as a home because you used it forpersonal purposes for 30 days. That is more than the greater of 14days or 10% of the total days it was rented. Example 2.You rented out the guest bedroom in your home at a fair rentalprice during the local college's homecoming, commencement, andfootball weekends (a total of 27 days). Your sister-in-law stayed inthe room, rent free, for the last 3 weeks (21 days) in July. The room was used as a home because you used it for personalpurposes for 21 days. That is more than the greater of 14 days or 10%of the total days it was rented. Example 3.You own a condominium apartment in a resort area. You rented it outat a fair rental price for a total of 170 days during the year. For 12of these days, the tenant was not able to use the apartment andallowed you to use it even though you did not refund any of the rent.Your family actually used the apartment for 10 of those days.Therefore, the apartment is treated as having been rented for 160 (170- 10) days. Your family also used the apartment for 7 other daysduring the year. You used the apartment as a home because you used it for personalpurposes for 17 days. That is more than the greater of 14 days or 10%of the total days it was rented (16 days). Use as Main HomeBefore or After Renting Use the following special rule when determining if you used yourproperty as a home. Do not count as days of personal use the days youused the property as your main home before or after renting it oroffering it for rent in either of the following circumstances. You rented or tried to rent the property for 12 or moreconsecutive months. You rented or tried to rent the property for a period ofless than 12 consecutive months and the period ended because you soldor exchanged the property. This special rule does not apply when dividing expenses betweenrental and personal use. Example 1.On February 28, you moved out of the house you had lived in for 6years because you accepted a job in another town. You rent your houseat a fair rental price from March 15 of that year to May 14 of thenext year. On the following June 1, you move back into your old house. To determine whether you used the house as a home, the days youused it as your main home from January 1 to February 28 and from June1 to December 31 of the next year are not counted as days of personaluse. Example 2.On January 31, you moved out of the condominium where you had livedfor 3 years. You offered it for rent at a fair rental price beginningon February 1. You were unable to rent it until April. On September15, you sold the condominium. The days you used the condominium as your main home from January 1to January 31 are not counted as days of personal use when determiningwhether you used it as a home. Figuring Daysof Personal Use A day of personal use of a dwelling unit is any day that it is usedby any of the following persons. You or any other person who has an interest in it, unlessyou rent it out to another owner as his or her main home under ashared equity financing agreement (defined later). However, seeUse as Main Home Before or After Renting underDwelling Unit Used As Home, earlier. A member of your family or a member of the family of anyother person who has an interest in it, unless the family member usesthe dwelling unit as his or her main home and pays a fair rentalprice. Family includes only brothers and sisters, half-brothers andhalf-sisters, spouses, ancestors (parents, grandparents, etc.) andlineal descendants (children, grandchildren, etc.). Anyone under an arrangement that lets you use some otherdwelling unit. Anyone at less than a fair rental price. Main home.If the other person or member of the family in (1) or (2) above hasmore than one home, his or her main home is the one lived in most ofthe time. Shared equity financing agreement. This is an agreement under which two or more persons acquireundivided interests for more than 50 years in an entire dwelling unit,including the land, and one or more of the co-owners is entitled tooccupy the unit as his or her main home upon payment of rent to theother co-owner or owners. Donation of use of property.You use a dwelling unit for personal purposes if: You donate the use of the unit to a charitableorganization, The organization sells the use of the unit at a fund-raisingevent, and The purchaser uses the unit. Examples The following examples show how to determine days of personal use. Example 1.You and your neighbor are co-owners of a condominium at the beach.You rent the unit out to vacationers whenever possible. The unit isnot used as a main home by anyone. Your neighbor uses the unit for 2weeks every year. Because your neighbor has an interest in the unit, both of you areconsidered to have used the unit for personal purposes during those 2weeks. Example 2.You and your neighbors are co-owners of a house under a sharedequity financing agreement. Your neighbors live in the house and payyou a fair rental price. Even though your neighbors have an interest in the house, the daysyour neighbors live there are not counted as days of personal use byyou. This is because your neighbors rent the house as their main homeunder a shared equity financing agreement. Example 3.You own a rental property that you rent to your son. Your son hasno interest in this dwelling unit. He uses it as his main home. Hepays you a fair rental price for the property. Your son's use of the property is not personal use by you becauseyour son is using it as his main home, he has no interest in theproperty, and he is paying you a fair rental price. Example 4.You rent your beach house to Rosa. Rosa rents her house in themountains to you. You each pay a fair rental price. You are using your house for personal purposes on the days thatRosa uses it because your house is used by Rosa under an arrangementthat allows you to use her house. Example 5.You rent an apartment to your mother at less than a fair rentalprice. You are using the apartment for personal purposes on the daysthat your mother rents it because you rent it for less than a fairrental price. Days Used forRepairs and Maintenance Any day that you spend working substantially full time repairingand maintaining your property is not counted as a day of personal use.Do not count such a day as a day of personal use even if familymembers use the property for recreational purposes on the same day. Example.You own a cabin in the mountains that you rent out during thesummer. You spend 3 days at the cabin each May, working full time torepair anything that was damaged over the winter and get the cabinready for the summer. You also spend 3 days each September, workingfull time to repair any damage done by renters and get the cabin readyfor the winter. These 6 days do not count as days of personal use. How To Divide Expenses If you use a dwelling unit for both rental and personal purposes,divide your expenses between the rental use and the personal use basedon the number of days used for each purpose. Expenses for the rentaluse of the unit are deductible under the rules explained in HowTo Figure Rental Income and Deductions, later. When dividing your expenses, follow these rules. Any day that the unit is rented at a fair rental price is aday of rental use even if you used the unit for personal purposes thatday. This rule does not apply when determining whether you used theunit as a home. Any day that the unit is available for rent but not actuallyrented is not a day of rental use. Example.Your beach cottage was available for rent from June 1 throughAugust 31 (92 days). Your family uses the cottage during the last 2weeks in May (14 days). You were unable to find a renter for the firstweek in August (7 days). The person who rented the cottage for Julyallowed you to use it over a weekend (2 days) without any reduction inor refund of rent. The cottage was not used at all before May 17 orafter August 31. You figure the part of the cottage expenses to treat as rentalexpenses by using the following steps. The cottage was used for rental a total of 85 days (92- 7). The days it was available for rent but not rented (7 days)are not days of rental use. The July weekend (2 days) you used it isrental use because you received a fair rental price for theweekend. You used the cottage for personal purposes for 14 days (thelast 2 weeks in May). The total use of the cottage was 99 days (14 days personaluse + 85 days rental use). Your rental expenses are 85/99 (86%) of the cottageexpenses. When determining whether you used the cottage as a home, the Julyweekend (2 days) you used it is personal use even though you receiveda fair rental price for the weekend. Therefore, you had 16 days ofpersonal use and 83 days of rental use for this purpose. Because youused the cottage for personal purposes more than 14 days and more than10% of the days of rental use, you used it as a home. If you have anet loss, you may not be able to deduct all of the rental expenses.See Property Used as a Home in the following discussion. How To Figure RentalIncome and Deductions How you figure your rental income and deductions depends on whetherthe dwelling unit was used as a home (see Dwelling Unit Used asHome, earlier) and, if used as a home, how many days theproperty was rented. Property Not Used as a Home If you do not use a dwelling unit as a home, report all the rentalincome and deduct all the rental expenses. See How To ReportRental Income and Expenses, later. Your deductible rental expenses can be more than your gross rentalincome. However, see Limits on Rental Losses, later. Property Used as a Home If you use a dwelling unit as a home during the year, how youfigure your rental income and deductions depends on how many days theunit was rented. Rented fewer than 15 days.If you use a dwelling unit as a home and you rent it for fewer than15 days during the year, you do not include in income any of therental income. Also, you cannot deduct any expenses as rentalexpenses. Rented 15 days or more.If you use a dwelling unit as a home and rent it for 15 days ormore during the year, you include all your rental income in your grossincome. See How To Report Rental Income and Expenses,later. If you had a net profit from the rental property for theyear (that is, if your rental income is more than the total of yourrental expenses, including depreciation), deduct all of your rentalexpenses. However, if you had a net loss, your deduction for certainrental expenses is limited. Limit on deductions.If your rental expenses are more than your rental income, youcannot use the excess expenses to offset income from other sources.The excess can be carried forward to the next year and treated asrental expenses for the same property. Any expenses carried forward tonext year will be subject to any limits that apply next year. You candeduct the expenses carried over to a year only up to the amount ofyour rental income for that year, even if you do not use the propertyas your home for that year. To figure your deductible rental expenses and any carryover to nextyear, use Table 2. Table 2