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How many personal days can I use in my rental property before it affects my tax return?



How many personal days can I use in my rental property before it affects my tax return?


A personal use day is any day that you're using the property or anyone else is using the property for less than a fair rental price. (Or your relative is paying fair rent but not residing there.) Personal use does not include a day spent "substantially full-time repairing and maintaining the property".


If your personal use days are more than the greater of 14 days or 10% of days you rent to others for a fair market price then the IRS considers your rental property as a residence. This means that you can have more than 1 residence for this test.


Once the rental property is considered a residence, you'll divide expenses between rental and personal use. If your divided expenses exceed your rental income, then you must carryforward the loss to next year.


In my practice, many clients that run a rental property end the year with more expenses than rental income. (A major contributor behind the large expenses is the depreciation of the rental property itself.) These clients enjoy a rental loss that reduces their income from other activities, to an extent, and reduces their overall income tax. Having the property declared a residence because of too many personal use days is an unwelcome surprise.


This rule does not apply to renting out a room or a floor in your residence. In that case, you must still divide expenses/depreciation between personal and rental purposes but you're not forced to carryforward a rental loss to next year.

© 2020 by Dennis C. Carroll, Esq.