Short-term rentals are subject to the 14-day rental rule, which determines how much you owe and the tax deductions you can claim.
According to the IRS, your vacation home is classified as a residence (rather than a business) if you use it yourself for more than the greater of: 14 days per year
10% of the total days you rent it to others at a fair rental price
Your home’s tax status changes based on those thresholds. The key thing to know is that whether your home is considered a business—and how many deductions you can make—depends on exactly how long you stay at your vacation home versus rent it to guests.
For example, if you typically rent your home 20 days per month but vacation there for the entirety of August, the IRS will still consider your home a personal residence—with a caveat. That caveat means you may write off certain business expenses, but not all the costs associated with renting.
However, if you take one 10-day family vacation per year at your home and rent the rest of the time, the IRS classifies your home as a business—so you can write off all relevant business expenses.
Each situation requires either Schedule A, E, or C. We recommend working with your tax adviser to pinpoint which information you’ll need to submit to the IRS, along with any tax deductions you may make in your situation.