Vacation Rental - 7 Day Rule

Vacation rentals are subject to many restrictive rules. Income and deductions can be reduced based on personal usage and losses can be limited. One of the most restrictive rules you must comply with is the "7 day rule". If a vacation rental is rented on average for 7 days or less, your deductible losses are normally limited to zero. To avoid limitation, you should rent your property for an average period of MORE THAN 7 days. To do this, you should avoid renting the property for weekends since this will make it difficult to achieve the required more than 7 day average period. If you can prove you "materially participate" in the activity, losses will be deductible, regardless of failing the 7 day rule, as business losses (i.e. not as rental losses). However, "material participation" is a high standard requiring many hours of work each year. For more information or assistance, please contact us.