Do You Own Rental Property or Rent Out a Vacation Home You Own?

Are you accurately reporting your rental income and calculating gross amounts from annual rents? Do you know whether your rental activities are considered “active” or “passive”? Are you tracking the hours you spend managing your rental property each month? And how are you handling deductions for rental expenses?

If you’re unsure about these details—like the types of expenses you can deduct or whether your income is considered active or passive—it’s time to consult a CPA. A professional can help ensure your rental activity is reported correctly and in compliance with both federal and state tax laws.

The Rise of Vacation Rentals and Mixed-Use Properties
Vacation rentals, like those listed on VRBO, are an increasingly popular option for property owners with multiple real estate investments. Yet, many owners are unclear on how to handle rental income when the property is used both personally and for income purposes—commonly referred to as “mixed-use” property.

Do You Qualify as a Safe Harbor Renter?
If you own mixed-use property, do you know if you also may qualify as a safe harbor renter? Safe harbor rules outline criteria that, if met, may classify a rental real estate enterprise as a trade or business.

Under safe harbor, rental real estate activity is defined as real property held for generating rental income. The safe harbor designation can include a single property or multiple properties. Qualifying as a trade or business may also make you eligible for the Qualified Business Income (QBI) deduction, which can reduce your tax liability.

Get Professional Advice
If you need more clarification about these requirements or how they apply to your rental situation, Steven Kiander, CPA at LMR, is here to help. With expertise in the complexities of rental income and expense reporting—whether for VRBOs or traditional rental properties—Steven can guide you through the process and ensure you stay compliant while maximizing your tax benefits.