Wring Tax Cash From Your Vacation Home

I would love to own a little place at the beach someday. Of course, since I'm a Jersey girl, it would have to be down at the Jersey shore. But nothing too big, just something comfy and close to the water that my kids and I can enjoy.

Sounds dreamy to me.

But these days, folks with summer homes are not so enamored.

With increasing energy costs, rising adjustable-rate mortgage payments, and the high price of gas, many folks are finding that sweet little escape at the beach is nothing but a money pit. As a result, many vacation-home owners have no choice but to consider renting out the place for a few weeks to help defray the costs.

Once you get over the notion that a stranger will be sleeping in your bed and using your toilet, it's actually not all that bad -- at least on the tax front.

A Freebie From Uncle Sam?

Depending on how long you rent out your home, the rental income may actually be tax-free.

"If you rent your vacation home for no more than 14 days during the year, the rent you receive is tax-free," says Bob Scharin, RIA senior tax analyst from Thomson Tax & Accounting, a part of the Thomson Corporation (TOC Quote).

And you don't even have to report that income on your tax return. So take the money and run!