Personal Use of a Rental Property Day Tests

Personal use of a rental property is counted in days. Cross the day test and the dwelling is used as a home for that year, which limits how rental expenses are deducted. Stay under the test and you still cannot deduct the days you actually used. A week in a house you hold for rent is this page. Moving in and making it your main home is a different event. The short-term versus long-term choice is a different event too. The day count is the same idea either way: who used the unit, and for what.

Publication 527 is the IRS discussion of dwelling units used as a home. The illustrations here are not your day count and not a promise about a deduction. Talk to a tax advisor for the return. An inquiry is not an approval.

Personal Use of a Rental Property and the Day Tests

Publication 527 treats you as using a dwelling unit as a home during the year if your personal use is more than the greater of 14 days or 10 percent of the days the unit is rented at a fair rental price.

Take a house rented at a fair price for 200 days. Ten percent of 200 is 20. The greater of 14 and 20 is 20. Personal use of 21 days means the unit was used as a home. Personal use of 20 days does not cross that illustration’s line. If the house was rented at a fair price for only 100 days, 10 percent is 10, and the greater of 14 and 10 is 14. Fifteen personal days crosses the line. Fourteen does not, in the publication’s “more than” test. Count your year. Do not borrow this example’s 200 days.

The consequence of crossing the line is a ceiling. Rental expenses are allocated between rental and personal use, and the rental slice is limited to rental income. The ordering Publication 527 uses puts the allocable mortgage interest and real estate taxes first, then operating expenses, then depreciation. Amounts you cannot use because of the ceiling may carry forward. That is a limit on losses from the rental use of a home. It is not the passive activity loss rules. If the day test lets a loss through, the passive activity rules can still limit it. Read both. Neither one waives the other.

If you do not cross the line, the home-ceiling does not apply in that way. You still split expenses so the personal days are not deducted as rental expenses. Vacant days are not personal days, and they are not fair-rental days. How interest and taxes are divided can use a different fraction than operating costs. Publication 527 walks through the division. Your advisor applies the current worksheet. This page will not invent the fraction.

Days That Count, and Days That Do Not

A day is a personal day if you use the unit for any part of it for personal purposes. It is then not also a fair-rental day. Personal purposes include use by you or by anyone who owns part of the unit. Use by a family member counts unless that relative pays a fair rental price and uses the unit as a principal residence.

Use by anyone at less than a fair rental price is personal use. A discounted month for a friend is not a favor that stays off the day count. The days are personal, and the cheap rent is not fair-rental income you can pair with a full set of rental expenses.

A swap counts. If you let someone use your unit under an arrangement that lets you use some other dwelling, those days are personal use whether or not rent is charged. Trading stays with another owner is personal use of yours.

A day you spend substantially full time repairing and maintaining the unit is not a personal day. The publication looks at whether the day was mainly the work. Other people can be present. A day that is mostly using the house, with an hour of odd jobs, is a personal day. Write down the work if you are going to treat a block of days as repair days. A calendar you reconstruct in April is a weak record.

Days the unit sits vacant, even if it is advertised, are not personal days and are not days rented at a fair price. They do not enter the 14-day or 10 percent test on either side. They still sit in the year, and they still affect how some expenses are split. Do not add vacant weeks to the rental-day denominator of the 10 percent test to create room for a vacation.

Fair rental price is what a person who is not related to you would pay. A peak-season week and an off-season week can have different fair prices. Charging peak rent for a relative’s holiday week, with no services a normal guest would get, is a facts question. When the price is off, the days tip to personal use.

Fewer Than 15 Rental Days

A separate rule sits on top when two things are both true: you use the dwelling as a home, and you actually rent it for fewer than 15 days in the year. Publication 527 says you do not include that rent in income and you do not deduct the rental expenses. Mortgage interest and taxes may still be deductible under the rules that apply to a home, which are not this page.

That exclusion is the short rental of a home you use as a residence. It is not a rule that every rental under 15 days is tax-free. A property you do not use as a home, rented for 10 days at a fair price, is not in the same sentence. Those rents can be income. Read the publication’s conditions before you leave a short booking off the return.

Holding the property out for short stays does not change the day tests. Short-term versus long-term rental investing is a strategy choice about operations and income. Personal use is a day count. A weekend rental and a year lease answer the 14-day question the same way: how many days were personal, and how many were fair rental.

Moving In Is Not a Handful of Personal Days

Converting a rental to your primary residence is a change of use. You stop holding the house for rent. Depreciation stops. The home-sale exclusion may later be limited by the years it was a rental. Do not account for a move-back as “we went over 14 days.” The day tests are for a year the unit is still a dwelling you rent and also use. The conversion is a different set of clocks.

The other direction, moving out and placing the house in service as a rental, has its own basis and depreciation start. Converting a primary residence to a rental covers that. Personal days after that placed-in-service date can pull the year back under the day tests. A few nights checking on a tenant are not the same as a month of personal occupancy. The facts decide, and the calendar should be kept while the year is happening.

Material participation and real-estate-professional status are hour tests about whether a rental loss is passive. They are not the 14-day test. Spending a week of personal use in the property does not create those hours, and staying out of the property does not prove them. Keep the day count and the hour log as two records.

If a business-purpose loan requires the property to stay a rental, heavy personal use can also be an occupancy problem under the note, separate from the deduction limit. Read the note. The tax day count will not answer the loan question. This page does not offer a mortgage for a home you intend to occupy.

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Frequently Asked Questions

Does one week of personal use end the rental deductions?

Not by itself. Personal use of a rental property crosses the line when your personal days are more than the greater of 14 days or 10 percent of the fair-rental days. Seven days is under 14. You still cannot deduct the expenses that belong to those seven days. The rest of the year is allocated. If fair-rental days are few, 10 percent of them can be less than 14, and the 14-day figure is the one that applies.

Are repair days personal use?

A day spent substantially full time on repair and maintenance is not a personal day under Publication 527. A day that includes personal use of the unit is a personal day even if you also did a chore. Keep a record of full workdays if you will treat them as repair days.

What if I rent the place to a family member?

Their use is personal use unless they pay a fair rental price and use the unit as a principal residence. A discount makes the days personal. A swap that lets you use someone else’s place is personal use even when money changes hands under that arrangement.

Do vacant days count against me as personal days?

No. Vacant days are not personal use, and they are not days rented at a fair price. Leave them out of both sides of the 14-day and 10 percent test. They can still change how interest, taxes, and other expenses are split. Publication 527’s worksheet is the split. Do not add vacant days to the rental days to loosen the test.

Is this the same test as material participation?

No. Material participation and real-estate-professional status are hour tests that affect whether a loss is passive. The day tests decide whether the dwelling was used as a home and how expenses are limited. A passive-loss limit can still apply after the day test is satisfied. They are two gates.