30.3 Vacation Homes, Personal Days & Rental Allocations

Two separate counts control the result

A dwelling used partly by the owner and partly by paying guests requires a §280A analysis. The first question is whether the dwelling is used as the taxpayer's home for the year. The second is how many days it was actually rented at fair rental value. These counts determine whether rental income is excluded, ordinary rental rules apply, or vacation-home deduction limits apply.

A dwelling is used as a home when personal use is more than the greater of 14 days or 10% of the days rented to others at fair rental value. The comparison uses actual fair-rental days, not every day an online listing was available. The word more matters: exactly fourteen days is not more than fourteen, and exactly ten percent is not more than ten percent.

Example: A cottage is rented at fair value for 100 days and personally used for 15 days. Ten percent of rental days is ten, so the greater benchmark is fourteen. Fifteen exceeds fourteen; the cottage is used as a home. If personal use were twelve days, it would not satisfy this home-use test, though expenses still would require allocation for the personal use.

What counts as personal use?

Personal use generally includes use by the owner, certain family members, another owner, anyone under a reciprocal-use arrangement, or anyone paying less than fair rent. Charging a family member a nominal amount does not transform every day into a fair-rental day. An applicable exception can apply when a family member uses the property as a main home and pays a fair rental price.

A day spent working substantially full time repairing and maintaining the property generally is not counted as a personal-use day under the applicable rule. Merely answering a guest message while taking a vacation does not make an entire day a repair day. Keep dates and the actual work performed. Special rules can also apply to days the property was the taxpayer's main home before or after a genuine rental conversion.

Vacant days are not actual rental days merely because the owner was willing to accept guests. A property can remain held for rental while vacant for ordinary expense purposes, but the vacation-home percentage computation still uses its own day-count rules. This is a common reason two different worksheets use different denominators without either being an arithmetic error.

Fewer than fifteen rental days

If a dwelling is used as a home and rented for fewer than fifteen days during the year, rental income generally is not included in gross income under §280A(g), and rental expenses are not deducted as rental expenses. Independently allowable personal mortgage interest, property taxes, and other qualifying items retain their own rules; the exclusion does not create a business deduction for all household costs.

Example: A taxpayer uses a residence personally throughout the year and rents it for twelve days during a local event, receiving $9,000. Assuming the statutory home-use conditions are met, the $9,000 generally is excluded, and rental-related cleaning and advertising do not become Schedule E deductions. If the taxpayer rents it for fifteen days, the fewer-than-fifteen-day exclusion no longer applies.

Fifteen or more rental days with home use

When the home-use test is met and rental days reach fifteen, report rental income and allocate expenses under the applicable method. The vacation-home limitation generally prevents the rental portion of expenses from creating a loss against unrelated income. This is not the ordinary passive rental-loss problem, so the $25,000 active-participation allowance does not override §280A.

The IRS worksheet generally separates expenses otherwise deductible, operating expenses, and depreciation, applying the required ordering and limits. Certain disallowed amounts carry forward and remain subject to the applicable property limitations. Keep carryovers by property and category; do not simply merge them into a Form 8582 passive-loss balance.

For an expense allocated by use days under the IRS approach, 100 fair-rental days and 25 personal days produce a rental percentage of 100 divided by 125, or 80%. A $3,000 shared utility expense would have a $2,400 tentative rental allocation before applying any income limitation. Direct rental-only costs and expenses with separately governed allocation rules require their own treatment. Interest and property taxes can involve special allocation rules or judicial-method differences, so follow the method specified in a question and avoid treating the 80% example as universal for every line.

Renting part of a building

When only part of a home is rented, divide shared expenses using a reasonable method such as relative square footage, while assigning direct expenses to the portion benefited. A separately rented duplex unit can be analyzed differently from an intermittently rented guest room used personally the rest of the year. Identify both space use and time use before multiplying percentages.

Finally, distinguish tax limitations from cash flow. A profitable short-term rental may still have personal-use allocations, while an economic loss might be limited by §280A before passive rules are considered. The correct sequence begins with days and use, proceeds to income and expense classification, and ends with the applicable loss limits.

Official reference

2025 Publication 527, Personal Use of Dwelling Unit, checked October 17, 2026.

Apply the day-count decision