This question is discussed in the Practice Question Palooza question episode of the BIF Bites podcast.
Rudy rents his beachfront home out to his frat brothers every spring for 14 days. He charges them $4,000 to cover damages. What is Rudy’s tax consequences?
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Correct answer: B. Rudy does not have to report income.
Instructor insight:
Vacation rentals homes are classified into one of three categories for tax purposes: 1. primarily personal use, 2. primarily rental use, and 3. mixed use.
If a rental property is rented less than 15 days per year, the property is classified as primarily personal use and the owner does not need to declare the rental income. Expenses associated with the rental activity are not deductible, except for mortgage interest, property taxes, and casualty losses.