Vacation Home Rental Tax Rules: §280A Complete Guide

You own a beach house or mountain cabin you rent out part of the year. The tax rules are nothing like a pure rental property — and nothing like your primary residence. IRC §280A creates a third category that depends entirely on how many days you use it personally versus how many days it's rented. Getting this wrong can cost you thousands in permanently lost deductions. Here's exactly how it works.

The three-bucket framework

Before any deductions, §280A sorts your vacation home into one of three buckets based on rental days and personal use days:

The personal use threshold is the greater of: 14 days, or 10% of the days rented at fair rental price.¹ If you rented the property for 40 days, the threshold is max(14, 4) = 14 days. If you rented it 160 days, the threshold is max(14, 16) = 16 days.

Bucket 1: The de minimis rule — tax-free rental income

If your vacation home is rented for fewer than 15 days in the tax year, §280A(g) says the rental income is simply not included in gross income — it's tax-free, regardless of how much you collect.¹ You don't report the income, and you don't deduct any rental expenses (they're already covered as personal residence deductions). Your mortgage interest and property taxes remain fully deductible on Schedule A.

This rule applies equally whether you rented for 1 day or 14 days. Many vacation home owners near major events (golf tournaments, motorsports, corporate conventions) deliberately stay under 15 days to capture tax-free income. The downside is zero deductions for the rental portion of your expenses — but if gross rental income is large and the tax-free exclusion exceeds the marginal value of those deductions, it's worth it.

What counts as a personal use day

Personal use days under §280A(d)(2) include any day the property is used by:¹

• You or anyone with an ownership interest in the property
• A family member (spouse, children, grandchildren, parents, siblings, or their spouses) at less than fair market rent
• Anyone at below-fair-market rent
• Anyone under a reciprocal use arrangement (e.g., you let a friend use your cabin in exchange for using their condo)

Critical exception: days you spend at the property solely for repair and maintenance do NOT count as personal use — even if you sleep there during the work.¹ Keep contemporaneous records: work logs, contractor invoices, photos with timestamps. This distinction can move you from vacation-home mode into pure rental mode on tight years.

Bucket 2: Vacation home mode — the expense allocation battle

Most vacation home owners fall here: rented ≥15 days and personal use exceeds the threshold. Your deductions are limited to your gross rental income — you can't generate a rental loss. But how those deductions are allocated between rental (Schedule E) and personal (Schedule A) makes a major dollar difference, and there are two competing methods.

The IRS method

The IRS allocates every expense category — mortgage interest, property taxes, insurance, maintenance, depreciation — by the fraction: rental days ÷ (rental days + personal use days). Vacant days are in the denominator only when they're used.

The Bolton method (Tax Court position)

In Bolton v. Commissioner, 694 F.2d 556 (9th Cir. 1982), the Tax Court and the Ninth Circuit held that mortgage interest and property taxes should be allocated by rental days ÷ 365 — treating them as expenses that accrue ratably over the full year.² Operating expenses and depreciation still use the rental/total-use fraction. The IRS has not acquiesced in Bolton and continues to litigate outside the Ninth Circuit — but the Tax Court has consistently ruled for taxpayers on this issue.

Why the difference matters: worked example

Suppose you own a lake house you purchased for $500,000 (80% building, 20% land). You rented it 30 days for $10,500 gross, used it personally 25 days, and left it unoccupied the rest of the year.

• Mortgage interest: $22,000/year
• Property taxes: $5,500/year
• Insurance, maintenance, utilities: $4,800/year
• Annual depreciation: $400,000 ÷ 27.5 = $14,545

Personal use (25 days) exceeds the 14-day threshold → vacation home mode.

For a taxpayer in the 32% bracket who itemizes, the Bolton method delivers $12,732 more in Schedule A deductions, worth $4,074 of tax savings — more than offsetting the $2,131 in additional tax on $6,658 of rental income. Net annual advantage of Bolton in this example: ~$1,943. Across years with larger gains or higher personal-use ratios, the spread grows.

Important caveat: the full Schedule A benefit of Bolton only materializes if your itemized deductions exceed the 2026 standard deduction ($16,100 single / $32,200 MFJ).³ For taxpayers taking the standard deduction, the IRS method may produce a lower total tax bill since zero taxable rental income beats the Bolton method's reportable rental profit.

The deduction ordering rule

Under §280A(c)(5), vacation home deductions must be claimed in a specific order, and each tier can only reduce rental income to zero — never below:¹

1. Tier 1 — Interest and taxes: The rental-allocated share of mortgage interest and property taxes. These are deductible regardless (personal use portion stays on Schedule A), so they consume the rental income bucket first.
2. Tier 2 — Operating expenses: Insurance, management fees, utilities, maintenance — allocated to rental by the applicable fraction. Deductible only if rental income remains after Tier 1.
3. Tier 3 — Depreciation: The rental-allocated depreciation. Deductible only if income remains after Tiers 1 and 2. Any depreciation not claimed here is not carried forward — it's simply not taken in that year.

Unlike passive activity loss carryforwards (which accumulate until disposition), vacation home deductions disallowed by the income cap do not carry forward — they are permanently lost. This is why preventing tier 1 from consuming the entire rental income bucket (via Bolton) has real dollar value.

Bucket 3: Pure rental — maximizing the §280A advantage

If you keep personal use at or below the threshold (14 days in most cases), the property is treated as a pure rental. All ordinary and necessary rental expenses are deductible on Schedule E without the income cap, and net losses are subject to the passive activity loss rules — potentially deductible under the $25,000 allowance (phases out at $100K–$150K AGI) or deductible in full if you qualify for Real Estate Professional Status.

The planning implication: if you're close to the 14-day threshold, a few extra maintenance-only days won't push you into vacation home mode, but a few extra personal-use days will. Tracking this carefully at the start of the year — not retroactively in April — is how you preserve pure rental treatment.

The short-term rental angle

If your vacation home is rented with an average guest stay of 7 days or fewer AND you materially participate in operations (typically 500+ hours), it's classified as a Schedule C business activity, not a passive rental. Net losses can offset W-2 income directly — no PAL rules, no REPS requirement. This is the "STR loophole." See our short-term rental taxes guide for the full mechanics and IRS audit patterns.

Selling your vacation home: §121 and depreciation recapture

The §121 primary residence exclusion ($250K single / $500K MFJ) can apply when you sell a vacation home that you later converted to your primary residence — but only partially. Under §121(b)(5), gain is prorated by the ratio of non-qualified use periods to total ownership.⁴ Years the property served as a vacation home (after 2008) are non-qualified use. Years as your primary residence are qualified.

Example: you owned a vacation home for 8 years, used it as a vacation rental for 5 years, then moved in for 3 years before selling at a $400,000 gain. The non-qualified use fraction is 5/8. The excluded gain is limited to 3/8 × $400,000 = $150,000, not the full $250,000 or $500,000.

If your vacation home qualifies as a 1031 exchange property (it was rented for investment purposes for at least 24 months before the exchange per Rev. Proc. 2008-16), you may also be able to defer the capital gain and recapture through a 1031 into a like-kind replacement property. See our 1031 exchange guide for the rules.

Planning strategies

1. Track days in real time

The single most valuable action: log every day with a category (rental at fair market, personal use, maintenance-only, vacant). A 2-minute daily note prevents a scramble in April and creates an audit trail. Your property management software may do this automatically — export a calendar at year-end.

2. Price repairs correctly

Days spent exclusively on repair and maintenance — painting, fixing HVAC, replacing appliances — are explicitly excluded from personal use under §280A(d)(2). A week of off-season renovation work can reduce your personal use day count meaningfully, especially if you're hovering near the 14-day threshold.

3. Charge family members fair market rent

Days when family members use the property at fair market rental rates do NOT count as personal use — they're rental days. Collect rent, document the market rate (comparable Airbnb or VRBO listings in the same area), and treat those days as rental days. This can flip vacation home mode to pure rental treatment if you're close to the threshold.

4. Use the Bolton method when it applies

If you itemize deductions and your tier 1 expenses (interest + taxes) allocated under the IRS method would exceed your rental income, the Bolton method saves you real money by preventing permanently disallowed deductions. A tax professional experienced in vacation rental properties will apply the right method for your situation.

5. Model the de minimis alternative

Before committing to heavy rental activity, run the numbers on the "rent under 15 days" scenario. If you can collect $15,000–$20,000 tax-free in under 15 rental days (large-event markets can support $2,000+/night), compare that to the net-of-tax return from heavier rental activity subject to §280A limitations. Sometimes less rental activity nets more after-tax income.

Frequently Asked Questions

Sources

1. IRC §280A — Disallowance of Certain Expenses: Vacation Homes (law.cornell.edu). §280A(g): rental income excluded from gross income if property is rented fewer than 15 days during the taxable year. §280A(d)(1)–(2): personal use day definition, including family use at below-market rent; excludes repair/maintenance days. §280A(c)(5): deduction limitation — expenses in vacation home mode are limited to gross rental income; three-tier deduction ordering (interest/taxes → operating → depreciation). §280A(d)(2)(A): 14-day / 10% threshold for personal use. Verified May 2026.
2. Bolton v. Commissioner, 694 F.2d 556 (9th Cir. 1982). Affirming Tax Court: mortgage interest and property taxes on a vacation home should be allocated to rental use using the fraction rental-days/365, not rental-days/(rental-days + personal-use-days). Interest and taxes are year-round accruing obligations not specifically triggered by use. IRS has not acquiesced in Bolton; the Tax Court has consistently ruled for taxpayers. Verified May 2026.
3. IRS — Tax Year 2026 Inflation Adjustments (including OBBBA). 2026 standard deduction: $16,100 single, $32,200 married filing jointly, $24,150 head of household. OBBBA (July 2025) raised the SALT cap to $40,000 (indexed to $40,400 in 2026), effective for taxpayers with modified AGI ≤$505,000. Verified May 2026.
4. IRC §121 — Exclusion of Gain from Sale of Principal Residence (law.cornell.edu). §121(b)(5): gain attributable to non-qualified use periods (vacation home or rental periods after 2008) is excluded from the §121 exclusion via proration (non-qualified use days / total ownership days). §121(d)(6): the §121 exclusion never applies to depreciation adjustments after May 6, 1997 — accumulated depreciation from rental years is always subject to §1250 recapture. Verified May 2026.
5. IRS Publication 527 — Residential Rental Property (Including Rental of Vacation Homes). Comprehensive IRS guidance on vacation home rules: tracking days, allocation methods (IRS position), deduction ordering, recordkeeping requirements, and Schedule E reporting. Verified May 2026.

§280A rules are statutory and have not been modified by OBBBA (2025), SECURE 2.0 (2022), or the Social Security Fairness Act (2025). The 2026 standard deduction and SALT cap figures reflect IRS inflation adjustments and OBBBA changes. The Bolton allocation method is the Tax Court's position; the IRS has not acquiesced and may challenge it outside the Ninth Circuit. Values and rules verified May 2026. Consult a qualified tax advisor for your specific situation.