Rent Your Vacation Home Tax-Free

The best type of income is tax-free income. Ordinarily, any rental income you receive is taxable. However, one little-known exception can be particularly useful.

You can rent out your vacation home for up to 14 days per year, and all the rental income you receive is tax free, no matter how much you earn. In fact, you don't even have to report the income to the IRS. This rule can provide you with a real windfall if you own a vacation home in a desirable area where people are looking for short-term rentals.

Vacation Home Rules

Your vacation home rental income is tax-free only if, during the year:

• you rent out your vacation home for 14 days or fewer, and
• you used it personally for (1) more than 14 days, or (2) more than 10% of the number of days during the year the property is rented for a fair rental, whichever is greater. (IRC Sec. 280A(g) (2025).)

Calculating Personal and Rental Use of Your Vacation Home

Determining whether vacation rental income is tax-free depends on how many days during the year the home is used for personal use by the owner and how many days it's rented. As you might expect, there are tax rules for determining this.

A day of personal use of a vacation home is any day that it is used by:

• you or any co-owner of the property
• a member of your family or a member of the family of any co-owner (unless the family member uses the home as their main home and pays a fair rental price)
• anyone under an arrangement that lets you use some other home,
• anyone at less than a fair rental price. (I.R.C. § 280A(d)(2) (2025).)

For these purposes, family members include your brothers and sisters, half-brothers and half-sisters, spouse, ancestors (parents, grandparents, and so on), and lineal descendants (children, grandchildren, and so on). However, renting your home to your aunts, uncles, nieces, nephews, cousins, or friends doesn't count as personal use. If you rent your home to anyone in this group of people for a fair market price, it is considered rental use.

Calculating Rental Use

Any day you rent your vacation home at a fair market rent is a day of rental use, no matter who you rent it to, unless it's a family member who doesn't live there full-time. Any day you rent your vacation home to anyone for less than a fair rental price is considered a day of personal use. Days you offer your home for rent but are unable to actually rent it to a guest don't count as rental days.

Days the home is vacant don't count as rental or personal use days.

What Is Fair Rental Price?

A fair rental price for your property is the amount of rent that a person who is not related to you would be willing to pay. The rent you charge is not a fair rental price if it is substantially less than the rents charged for other properties that are similar to your property.

A good way to prove to the IRS how long your guests—paying and otherwise—stayed in your vacation home is to have them all sign and date a visitors' book.

Tax Deductions for Your Vacation Home

The tax deduction rules applicable to any personal vacation home or second home apply to vacation homes in this category. Under these rules, all your real estate taxes are deducted as a personal itemized deduction on your IRS Schedule A. Because the home is treated as a personal residence for tax purposes, you may not deduct any operating expenses for the property or take any depreciation deduction. You don't file Schedule E, the tax form landlords file to report their income and expenses, because your home is not a rental property.

Getting Help With Tax Deductions

Hiring the right tax professional is important because getting good tax help can translate into more money in your pocket. To learn more about tax deductions, talk to a tax lawyer or another tax adviser.