Vacation home. Frankie owns a vacation home which she uses for vacation for 150 days...
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Vacation home. Frankie owns a vacation home which she uses for vacation for 150 days and rents to strangers at fair rental value for 150 days. The rest of the year it is not used. She uses the IRS method to allocate expenses. She had $34,000 of rental income. She paid $40,000 of mortgage interest on the home, all of which would be deductible if she solely made personal use of the home. She paid no real estate taxes. Operating expenses (including maintenance, insurance, utilities, etc.) were $18,000. Depreciation would be $22,000 if the home were solely used as a rental. (To be clear, the expenses noted above are all totals BEFORE allocation.) How much income or loss should she report for the home? Income of $34,000 Loss of $6,000 ($34,000 rental income - $20,000 mortgage interest - $9,000 operating expense - $11,000 depreciation] No income or loss Income of $14,000 [$34,000 rental income - $20,000 mortgage interest]
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