Let’s start with a case study to set this up. You live in the Detroit area so let’s assume a major sporting event is coming back to town like the U.S. Open and they’re holding it at Oakland Hills. You’re lucky enough to own a home less than a mile away from the golf course and an international financier agrees to rent your house for an obscene amount of money to live in your house for the week. You move into a local hotel and a week later, you move back into your house. Tax time rolls around and now you’re worrying about how to report this on your taxes.
Fortunately, the answer is, you don’t have to do anything. If you rent your home (or your vacation home) for less then 15 days, you don’t have to report it all. There is no income limit so if someone was stupid enough to pay your$100,000 to rent your house for a week, you wouldn’t have to show it anywhere on your tax return. The safe harbor period is two weeks. As long as you rent your home less than 15 days, then no reporting is required.
Things get a trickier if you rent your house for a longer period of time. Then it’s a big proration exercise. So if you spend $2,400 on property taxes that’s $200 a month and if you rent your house for the four winter months, then $800 would be reported as a rental expense and the rest would show up on Schedule A if you itemize. This also creates some extra reporting when you sell your house because if you qualify for the principal residence exclusion, you’ll have to recapture and pay tax on any depreciation you took while renting out the house.