Tax Implications for Vacation Rental Donations – Get the FAQ’s

04.16.2011 · Michael McFadden

It’s not surprising vacation home owners, rental managers and even tax professionals have questions about the tax laws applicable to donating time at a vacation rental. That’s why Geronimo Vacation Rentals for Charity, and OneSpareWeek, created a document that will help answer these questions.

 

We’ve published a short document that highlights all of the tax implications of vacation rental properties including the 14 day rule, silent auction purchases,  and more.  Please, check it out by clicking here.

 

Posted in Taxes

2 Responses to “Tax Implications for Vacation Rental Donations – Get the FAQ’s”

  1. Audre Balsamo says:

    Just what are the tax ramifications of donating a week at a silent auction, a week to a family member (or 3) or a trade-off for work performed at my property?,

  2. Hi and thanks for the comment. This may help to answer your question.

    Tax Deduction
    We’d suggest that you consult with your tax advisor, but we located an (unfortunate) IRS ruling specifically geared to target donations of time at vacation rentals. In Revenue Ruling 89-51, the IRS ruled that the right to use a vacation home for one week, donated by the owner of the home to a charitable fundraising auction and sold for fair rental value, constitutes the ‘right to use property” and is not a deductible contribution. Again, consult your tax advisor for his / her guidance. The theory is that allowing the use of an otherwise vacant property does not result in a direct, incremental cost to the owner. The case can be made that if you had rented your vacation home and collected income and then donated that to charity, you would have shown revenue (and paid tax on that revenue) and received a tax deduction, therefore it would be a “wash”
    Taxes on Income Received
    If you receive a portion of the rent and the other portion goes to charity, then you should pay tax on the portion you received. You can’t take a charitable deduction for the amount donated to charity (since you didn’t pay tax on the revenue), but you also don’t have to report the charitable portion as income.
    14 Day Rule
    Internal Revenue Code Section 280A governs rules on the deductibility of expenses related to a second home. Section 280A dictates that if a vacation home owner occupies the home for more than the greater of a) 14 days or b) 10% of the number of days that the property is rented for fair value, then the expenses related to the home are personal in nature and non-deductible. So, if an owner rents a second home for 30 days a year, then the owner can stay in the home for 14 days and preserve deductibility, and if they rent the home for 200 days a year, then the owner can stay in the home for 20 days and preserve deductibility. If expenses are limited due to excess personal use, then expenses are prorated based on the days used personally. Mortgage interest and real estate taxes are deductible anyway, so these expenses are not affected by the proration rule.