After having CPA and PA give conflicting interpretation, I'm not sure but I think this means that: If my personal use is 20 days, I must rent it at least 200 days to deduct expenses as a production of income property, i.e. deductible loss on schedule E. Is this a valid example of the second condition (2) above, the 10% not having been breeched but being the greater number of days? (The loss of course would be passive loss for me, separate issue.) Thanks.
It's not clear from your post what the conflict of opinion centered around, so I'll just quote the Code and let you see if that's gonna clear up the fuzziness. Here's IRC section
280A, in part: (1) In general For purposes of this section, a taxpayer uses a dwelling unit during the taxable year as a residence if he uses such unit (or portion thereof) for personal purposes for a number of days which exceeds the greater of - (A) 14 days, or (B) 10 percent of the number of days during such year for which such unit is rented at a fair rental. For purposes of subparagraph (B), a unit shall not be treated as rented at a fair rental for any day for which it is used for personal purposes.Also, I'm not really up on the "breeching" of percentages, so I'll stay away from that topic too. But, on the subject of personal use days, I am experienced. I wonder if you are acquainted with the definition of "maintenance days." They are days that you work on your property - there are rules for how much and how hard and how effectively you need to work... - which *don't* count as personal use days in determining whether you've used the property "as a residence" during the year, which in turn determines whether your losses from the property may be limited to zero.
When you wrote "I must rent it at least 200 days to deduct expenses" you might be pointing to the source of confusion. Being able to deduct expenses and being able to deduct a loss are not the same thing. The "10% of rental days allowed as personal use" is a condition on being able to deduct a loss from the rental and being able only to deduct expenses up to the amount of the rental income. I have not had my coffee this morning, and maybe it shows in my inability to express myself. Try this: Unless the personal use of your rental property is less than 15 days, or 10% or fewer of the number of days the property is rented at a fair market rent, your *losses*
- if any - will not be allowed as a tax deduction. The expenses of the rental - already prorated for the number of days of rental vs. other use - or is it total days in the year? See Bolton case - will be allowed only to bring your net rental income down to zero (except for interest and taxes and casualty losses - a separate issue, see elsewhere). If your personal use days (but be sure to see discussion of "maintenance days" elsewhere) are fewer than
15 or less than 10% of the number of days of rental, the deduction of your expenses apportioned to the rental - if they're larger than your income - will not be limited to the amount of your income (this is called "loss not allowed") as they would be if your personal use days were larger than... This completely ignores the limitations on passive losses, which - with a couple of exceptions - will deny you a current deduction for the rental loss, after it's netted with all other net passive income and losses, but suspending the loss until such time - i.e. the future tax year - that you have passive income or dispose of the property (in a fully taxable disposition, one in which all the gain if any would be recognized.... What was the question???BeanSmart website is not affiliated with any of the manufacturers or service providers discussed here. All logos and trade names are the property of their respective owners.