How do you recommend inputting a vacation/second home for which there is rental income and related deductions. Does it go into the vacation home tab with income and expense treated as special items under the special tab or does it go into the real estate tab? Any idea how (or if) depreciation taken as a deduction is accounted for by the program?
Thanks very much.
WB
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RSS
If you are primarily using this property as an investment (see the IRS rules for use of investment real estate for personal use), you should enter it using the real estate tabs. Depreciation is appropriately calculated (I forget which depreciation schedule is used, but I think its the 27.5 year one for residential property), deductible expenses, rental income, etc are all accounted for there. If you primarily use it as a vacation home with the occasional rental, then you should probably enter it as a vacation home with the expenses and income as special expenditures. The principal difference is the depreciation recapture that has to happen with investment real estate. Depreciation effectively lowers your basis and increases your eventual capital gains on investment real estate but not on vacation homes.
Best,
Dick Munroe
The current situation is a mix. Now, it is primarily rental with a little personal use as allowed by IRS regulations. In the future (within a few years) it will likely be solely a vacation home.
Thanks for the quick response and the clear explanation.
WB