The Ultimate Vacation Rental Property Tax Guide

Rental property owners and rental property managers need to know their rental property tax obligations and liabilities. It can be easy to get caught up in the excitement of owning a rental home, and taxes might be the last thing on your mind. Nonetheless, this is an important thing to learn now, so you don't end up with an unwanted tax bill later. This guide will help you avoid some of the significant pitfalls of rental property tax accounting.

Are you looking to own a vacation rental property in Sanibel and Captiva, FL? We can help you manage your rental and answer any questions you may have about rental property tax. Read more about our services here!

The Ultimate Vacation Rental Property Tax Guide

Essentially, three situations will determine how the IRS views your rental:

• You rent to tenants in the short-term

• You rent to tenants for most of the year

• You live in your rental property but rent it out occasionally when you're away from home

No matter which of these scenarios you find yourself in, it's important to know the differences between them regarding rental property tax.

Short-Term Rentals

If you're renting on a short-term basis, you own a property (either your home or a second home) that you rent out occasionally for supplementary income purposes.

• Renting for 14 days or less per year. If you rent out your property for 14 days or less, you can hold onto the income you make without paying taxes. It doesn’t matter how much of a profit you made, either. This is especially ideal if you live in a high-demand area at certain times of the year (perhaps due to an event such as a major music festival). 

• Renting for more than 14 days per year. If you rent your property for more than 14 days, you’ll have to pay taxes. In this case, you must stay organized and keep track of your expenses. You’ll have to be able to differentiate between what you spent for your rental property versus your own personal living expenses.

Long Term Rentals 

Investing in a long-term rental means you rent out your property for most of the year, and you don't reside in the home full-time. 

• Residency requirement. For your vacation rental to be considered a rental property, you must only reside in the property for 14 days or less (or 10% of the time it is rented) per year. Therefore, this is something you have to be consistent about every year.

• Property management can help. Having a property management company can help ease your burdens and assist you with earning tax benefits. At Kingfisher Vacations, we list, market, rent, clean, inspect, and maintain your property. In addition, we communicate with all of our clients regularly and manage online reviews. As a result, we can help you decide if a vacation rental is the right choice and guide you through the ownership process. Plus, we can even connect you to local real estate agents and assist you with any issues regarding rental property tax. So contact us today to get started!

Deductions

Luckily, following rental property tax guidelines pays off in the long run. You can claim several deductions for your rental property to get the most out of your ownership experience (and collect more profits).

1. Property taxes

2. Utilities (water, power, internet)

3. Repair maintenance, supplies, labor

4. Property management service fees.

5. Cleaning expenses.

6. Legal fees, accounting, and bookkeeping needs

7. Mortgage interest

8. Any additional advertising costs

9. Business-related travel

10. Some improvement work (security alarms, roofing, fire safety add-ons)

11. Office supplies 

12. Business-related credit card interest

Invest in a Vacation Rental with Kingfisher Vacations Today

Our experts at Kingfisher Vacations are here to assist you in finding the ideal property in Sanibel and Captiva Islands. We have over 56 years of experience and can offer you the absolute best service given our vast knowledge of the area. Our gorgeous private properties have heated pools, hot tubs, stunning ocean views, delightfully bright décor, and boat docks. We provide you with everything you could ever want for your property.