- What is a "mixed-use" rental property?
- How do I calculate what percentage of my expenses I can deduct?
- What is the difference between the IRS method and the Tax Court method for expense allocation?
- Does personal use of my rental property limit my deductions?
- What happens if my personal use exceeds 14 days — does the property become a vacation home?
- How do passive activity loss rules interact with personal use?
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Check my rental tax situation — free →Frequently asked questions
What is the rental-use percentage for a mixed-use property?
Your rental-use percentage depends on which allocation method you use. Under the IRS method, it is rental days ÷ 365. Under the Tax Court method (which courts have upheld and which is more favorable to taxpayers), it is rental days ÷ (rental days + personal use days). The rental-use percentage determines what portion of mortgage interest, property taxes, utilities, insurance, and depreciation is deductible on Schedule E vs personal Schedule A.
What is the difference between the IRS method and the Tax Court method for allocating rental expenses?
Both methods agree on how to allocate operating expenses like utilities and insurance — by the ratio of rental days to total use days. They differ on mortgage interest and property taxes: the IRS method allocates these by rental days ÷ 365, producing a lower rental deduction. The Tax Court method allocates by rental days ÷ actual use days, producing a higher rental deduction. Courts (including Bolton v. Commissioner) have upheld the Tax Court method, though the IRS still officially uses its own method.
Does personal use of my rental property affect my ability to deduct losses?
Yes, significantly. If your personal use exceeds 14 days or 10% of rental days (whichever is greater), the property is classified as a vacation home under §280A. In that case, your deductible rental expenses cannot exceed your gross rental income — meaning you cannot create or claim a tax loss from the property in the current year. Expenses that exceed rental income are suspended and not currently deductible.
Can I deduct my rental's mortgage interest if I also use it personally?
Yes, but the deduction is split. The rental-use portion (calculated using your chosen allocation method) is deductible on Schedule E as a rental expense. The personal-use portion may be deductible on Schedule A as home mortgage interest — if you itemize deductions. The total deduction between both schedules should equal what you actually paid in mortgage interest for the year.
What counts as "personal use" of a rental property?
Personal use includes any day you or a family member occupies the property for personal purposes, any day the property is used by someone else who pays below-market rent, and any day you receive it through a home-swap or reciprocal arrangement. It does NOT include days you spend at the property for repair and maintenance — those days are not personal use days. Keeping a log of who used the property and why is essential for mixed-use properties.
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