Taxes can quickly become very complicated when you own any kind of income property. How you will use you Breckenridge vacation rental property will impact what kind of tax breaks you can get. It is highly recommended that you hire a tax professional to help you find all of the potential tax breaks and avoid any costly mistakes. You should be aware of the following tax breaks as you make decisions about how to use and rent your vacation home.
14 Day Rule
You may have heard of the 14 day rule, but don’t know what it means. In order to consider a property an income property, and therefore claim deductions as such, you may not use your property for personal use more than 14 days out of the year. That means if you want to spend an entire season at your property, you cannot count it exclusively as a rental property and claim losses. However, you can make proportional deductions. Alternatively, if you rent your property less than 14 days you do not have to classify it as an income property. Avalara points out that days used to perform maintenance on the property are not counted as personal use days. You may be able to extend your vacation as long as you are fixing or upgrading your property.
The new tax code has changed the amount of debt that you can receive a mortgage interest deduction for. Fortunately, this new change does not impact rental properties. If your vacation home is a full time rental property you can deduct all of the interest on the mortgage as a business expense.
TurboTax reminds vacation rental owners that any fees you pay to services that maintain, advertise, or book your vacation rental can be deducted as business expenses. Some services charge a percentage of your rental, while other require a subscription fee, or flat fee. Keep track of what you pay to advertise and book your home, because it can save you some money in taxes.
Travel to your vacation rental property can be deducted if it is directly related to renting the property, according to Accounting Today. Mileage for driving to meet a renter, clean the property, or make repairs can be deducted. Keep track of your mileage and a log of what business function you performed while you were there.
If you are paying income tax on your Breck vacation rental property, the number of deductions continue to go on and on, just as though your are running a business, or are an independent contractor. Meticulous records will be your best friend when is comes to tax time. Be sure to keep track of all the expenses put into your vacation rental, ranging from a bottle of windex to a new heating system. With excellent records, a competent tax professional can help you take advantage of all the potential deductions, while still helping you meet your obligations.