Wring Tax Cash From Your Vacation Home

Here are the arcane technical rules for the first scenario: Your vacation home is rented for more than 14 days and your personal use exceeds the greater of 14 days, or 10% of the rental days. Translation: You use it more than you rent it.

In this case, the rental portion of your deductions also should be reported on Schedule E. Things such as mortgage interest, real-estate taxes, rental agent fees, cleaning and maintenance costs, insurance premiums, utilities and depreciation are just some of the things you can list. Basically anything out-of-pocket that helps you keep up the home can now be deducted.

But since you use the house for pleasure more than "business," your expenses cannot exceed the gross income you make from rents. However, any excess deductions can be carried over to a subsequent year.

The part of your deductions that represent the personal use of the house still should be reported on Schedule A. In very simple terms, let's presume that only 15% of the usage is rental. Then only 15% of the mortgage interest goes on Schedule E. The remaining 85% should be reported on Schedule A.

Now, if you answered "yes" to the second question, and the home is more of an rental property (not a fun-family beach home), then it should be treated accordingly.