Vacation home tax rules: Section 280A and the 14-day test

A vacation home that is both rented and personally used is governed by Section 280A, which sorts the property with one test: did personal use exceed the greater of 14 days or 10% of fair-rental days? Below the line, the property is a rental that can generate losses (subject to the passive activity rules). Above it, the home is a "residence" — expenses are prorated and deductions are capped at rental income under Section 280A(c)(5), so the property can never produce a loss, only a carryforward. And at the friendly extreme, fewer than 15 rental days a year means the income is not reported at all.

The day-counting rules

Personal use days under Section 280A(d) include use by the owner, the owner's family (Section 267(c)(4) relatives — even at full rent, unless the home is the relative's principal residence), reciprocal-use arrangements, and any below-market rental. Days devoted substantially full-time to repairs and maintenance are excluded. Fair-rental days are days actually rented at market rates — vacant days count in neither column but matter for expense allocation.

How the day counts classify the property.

Expense ordering when the cap applies

For a residence-classified property, expenses allocate between rental and personal use (the statute suggests rental days over total use days; the Bolton line of cases lets taxpayers spread mortgage interest and property taxes over the full year, usually favorably). The rental share then deducts against rental income in a fixed order: first interest and taxes (deductible anyway), then operating expenses, then depreciation — with any excess disallowed and carried forward under Section 280A(c)(5) to a future year with rental profit. Depreciation going last is why residence-classified properties generate almost nothing from acceleration: a cost segregation study on a capped vacation home mostly manufactures carryforwards, one more entry for when a study doesn't pencil. Publication 527 walks the allocation worksheets.

Note the regimes stack rather than substitute: a vacation property that clears the 280A residence test still faces Section 469, and if average stays run seven days or less it is analyzed under the short-term rental rules — 280A residence status also disqualifies the property from the QBI safe harbor.

The Augusta rule, briefly

Section 280A(g) is the statute's odd gift: rent a home you use as a residence for fewer than 15 days in the year and the income vanishes from gross income — no reporting, no deductions. Its namesake use (Masters week) is uncontroversial. Its aggressive use — an owner renting their home to their own S corporation for 14 board meetings at ambitious day rates — is a recurring exam target: the Tax Court in Sinopoli v. Commissioner (T.C. Memo. 2023-105) slashed exactly that arrangement to a fraction of the claimed rate for lack of fair-market support. The rule is real; the appraisal support had better be too, in line with the site's general documentation standards.