Tax Laws for a Vacation Home Used as a Business Lodging Complex (2024)

FAQs

Tax Laws for a Vacation Home Used as a Business Lodging Complex? ›

The vacation-home section of tax law, section 280A(f)(4), states that nothing in the vacation-home rules shall disallow any business deduction for business travel. In other words, making your condo a business hotel and using it as a hotel for business travel does not trigger the vacation-home rules.

To the Internal Revenue Service, a vacation home is just another property as long as it's used for business lodging purposes. As such, your business has the opportunity to write off many of the expenses that it incurs in using and owning the property.

Additionally, you can write off lodging, taxis, car rentals, and 50% of your food costs on business days. You can also deduct laundry, dry cleaning, personal grooming, and other “ordinary and reasonable” expenses for the trip. Likewise, only 50% of your food costs are deductible, along with your portion of the lodging.

For the IRS to consider a second home a personal residence for the tax year, you need to use the home for more than 14 days or 10% of the days that you rent it out, whichever is greater. So if you rented the house for 40 weeks (280 days), you would need to use the home for more than 28 days.

Lodging expenses are the costs for an overnight stay, usually in a hotel, that may be taken as a federal income tax deduction if the Internal Revenue Service's criteria are met. Lodging expenses are usually a business expense that is incurred when someone must travel away from their tax home to do business.

For a getaway to qualify as a business trip, you need to spend the majority of your trip doing business. For example, say you go away for a week (seven days). You spend five days meeting with clients, and a couple of days lounging on the beach. That qualifies as business trip.

Are Second-Home Expenses Tax Deductible? Yes, but it depends on how you use the home. If the home counts as a personal residence, you can generally deduct your mortgage interest on loans up to $750,000, as well as up to $10,000 in state and local taxes (SALT).

You can deduct 100% of your lodging expenses during your business travel as long as they are reasonable. Lodging expenses are fully deductible if you travel outside your tax home as long as you need to stay overnight and the expenses are reasonable.

Lodgings may be self-catering, whereby no food is provided, but cooking facilities are available. Lodging is offered by an owner of real property or a leasehold estate, including the hotel industry, hospitality industry, real estate investment trusts, and owner-occupancy houses.

Can you deduct the cost of staying in a short-term rental you rent through a hosting website like Airbnb or VRBO? Yes, it is. In fact, you can claim a partial deduction even if you take your family with you on a business trip. But there are some strict requirements you must meet to satisfy the IRS.

Is a second home a good tax write off? ›

If you use the house as a second home—rather than renting it out—interest on the mortgage is deductible within the same limits as the interest on the mortgage on your first home.

A few options to legally avoid paying capital gains tax on investment property include buying your property with a retirement account, converting the property from an investment property to a primary residence, utilizing tax harvesting, and using Section 1031 of the IRS code for deferring taxes.

Investment properties can offer you tax deductions by claiming operating expenses and ownership. Second homes, on the other hand, can also generate rental income and tax deductions for expenses, as long as the owner lives there for at least 14 days a year or 10% of the total days rented.

Lodging accommodations fall into 3 distinct categories: hotels, vacation rentals, or outdoor lodging.

Accommodations and Lodging

This can include anything from a hotel room to an Airbnb rental. If you need to pay for overnight accommodations on a work trip, whether that's a hotel or other type of lodging, it counts as a travel expense.

Travel and lodging expenses means regular and essential business operating expense incurred by a person when he/she traveling away from the home for business purpose or in the capacity of an employee.

As an exclusive rental property, you can deduct numerous expenses including property taxes, insurance, mortgage interest, utilities, housekeeping, and repairs. Even towels and sheets can be deductible.

Can you deduct the cost of staying in a short-term rental you rent through a hosting website like Airbnb or VRBO? Yes, it is. In fact, you can claim a partial deduction even if you take your family with you on a business trip.

Vacation rental supplies, appliances, and furniture costs

Bed sheets, lamps, dinnerware, and beds for all your guests. Completely furnishing and stocking (and restocking) your vacation rental can rack up a hefty bill when all is said and done. Luckily, those purchases count as possible deductions.

Can you depreciate vacation rental property? Yes! As long as you own the property, it has a determinable useful life, it's expected to last more than a year, and it's used for business purposes, you can go ahead and claim depreciation.