Rental Property Questions

[Yardley CPA]

I don't deal with rental properties everyday but I have my share.  I have researched the topic somewhat extensively, reading through IRS guidance and other articles.  Hoping you confirm my understanding on how to handle these situations:

- Fair Rental Days vs. Personal Use Days

• Taxpayer owns beach home.  They rent it for 30 days throughout the year and they use it personally for 50 days.  On Schedule E you would input those exact numbers.  Just because the taxpayer owns the property, they do not have to indicate personal use as 365 days less the number of days rented, correct?  Personal use is exactly that...the number of days the owner used it personally...correct?

- Expenses

• Using the example above, 30 days rented and 50 days personal use.  Are certain expenses restricted to the ratio of days rented / personal use?  I have a client who receives a reporting statement from the realtor they use to rent the property.  It lists a cleaning expense specifically for the weeks the property was rented.  That entire expense can be taken on Schedule E, it does not need to be prorated, correct?  Expenses specific to the rental period can be taken in full?  I recognize other expenses will be and should be prorated.  

- Depreciation

• Depreciation is taken during the time the unit is rented.  Once the unit switches totally to personal use, depreciation ceases.  When the property is sold, recapture is based on the depreciation actually taken, correct?
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Thanks very much for reading through my long post.  Appreciate your feedback. 

 

 

 

[Lee B]

My understanding is fair rental days is the number of days actually rented.

Personal use days are a combination of the days you, any family members and any friends that didn't pay rental stayed there.

[Yardley CPA]

39 minutes ago, cbslee said:

My understanding is fair rental days is the number of days actually rented.

Personal use days are a combination of the days you, any family members and any friends that didn't pay rental stayed there.

Thank you.  That's exactly my understanding as well.  Fair rental days are the days actually rented.  All other "personal use", falls under "personal".   On Schedule E, you would enter those two figures when the rental was not for the entire 365 days. 

[grandmabee]

I thought fair rental days were days available for rent.  But you are under vacation rental which has different rules.

[Lee B]

"Fair Rental Days refers to the number of days that the unit was actually rented out- rather than the total time it was available to be rented."

[Catherine]

Yes, the rental-only expenses (cleaning, management or VRBO fees, and the like) do not need to be pro-rated. And you have the depreciation recapture rules correct as well.