My understanding has been that a property owner has to limit his/her
personal use of his/her rental property to 14 days in order to qualify
the property as "rental property".
Given the recession and reduced rental demand, enforcing that rule is
the equivalent of requiring that a property remain vacant.
Is the 14-day rule still in effect? And if so, are there any property
insurance problems as a result of those vacancies?
My wife and I own a property in a resort area in the state of Maine,
which we rent by the week during the summer tourist season and close
down completely in the winter. We have never had a problem getting
insurance. The summer demand has actually increased over the last
several seasons in spite of the recession. Last summer was our most
profitable year since we bought the house in 2001. This is probably an
entirely different situation from house or apartment rentals in a non-
resort location, but there is definitely no shortage of vacationers
willing to pay between 1100 and 1700 a week in a resort area.
I would guess that the problem of vacancies because of the recession
varies a lot depending on the type of property and location. Those
affluent people earning over 250,000, about whom there has been all
the controversy as to whether or not to extend the tax cuts, no doubt
still have plenty of cash to spend on holidays, and that is probably
also true for many people with less income.
"You are considered to use a dwelling unit as a home if you use it for
personal purposes during the tax year for more than the greater of: 14
days or 10% of the total days it is rented to others at a fair rental
I took a tax class and will be doing taxes for first time in 2011. I
believe that 14 day rule existed in 2009 and will for tax year 2010
How that impacts vacancy and how you connected those two dots is
puzzling to me... that 14 day rule pretty much means if collect rent
for 14 days or less, that income is free from taxation. Meaning if
superbowl comes to your city, and you rent your house for 10 days,
that income is tax free.
If you were looking at rule from a different direction, remind me what
you are after?
Its a bit more convoluted that it appears AND I'm not sure I follow your
The rule says "essentially" that in order to treat the property "solely" as
a rental your personal use must be limited to the lesser of no more than 14
days OR 10% of the days rented. If your personal use exceeds these amounts
you have to limit the rental activity as reported on Schedule E.
So if you rented the property for 200 days your personal use can't exceed 14
OR if you rented the property for 100 days your personal use can't exceed 10
This applies to ability to deduct the expenses associated with the property.
I don't quite follow your thinking about how enforcing that rule means that
the property must remain empty - but maybe I'm missing something. It gets
quirky because the property can be considered FOR RENT and still qualify AND
some of the time you spend there personally may not count as personal use.
For example, if you spent a whole month at the property BUT you spent that
time putting on a new roof, installing new carpet, painting and doing other
repair/maintenance type stuff then this is NOT personal use and doesn't
Gene E. Utterback, EA, RFC, ABA
bo peep writes:
The following article discusses the 14-day (or 10%) rule and has some
examples of different cases and applications (ie. lots of rental little
personal use, lots of personal use little rental, etc)
Are you sure about that? The way I read the regulation, you can always
use it personally for up to 14 days, and it is still a rental
property, no matter how long it is actually rented.
A gray area is when you live there for a longer period yourself but do
some renovations and handle business matters at the same time. When my
wife and I bought our house in Maine, we lived in it for 6 months
doing a lot of repairs, installing a new furnace, fixing the roof,
upgrading the electrical system, and other business-related things,
but we still had a great time, almost like a vacation, hiking,
playing, eating, enjoying the scenery, and living it up. Our tax
account said it was still a rental property for the year, and the IRS
Neither of the above statements is true. It follows from the
information in the IRS.gov site that the owner is allowed personal use
of the property for as many as 32 days of the year, and it would still
be considered a rental property, provided it is rented for the
remaining 333 days. And 14 days is allowed irrespective of the number
of days rented. It is the GREATER of 14 days or 10% of the number of
My esteemed colleague Don may be right. I have not checked the rules and
regs on this and wrote from recollection.
The caveat here is that one should always check what they get here. While
most of us, myself included, do our best to provide accurate and correct
information, it is FREE advice and is often not fully researched.
Gene E. Utterback, EA, RFC, ABA