Holiday Home Rentals and Tax Deductions

Holiday Home Rentals and Tax Deductions

For some people, a popular investment decision is to rent out a holiday house. You might have found an appealing property in a great location, and want to enjoy it yourself from time to time, while also renting it out as a holiday rental at other points.

This can be a great balance between potential financial benefits, and the ability to enjoy your very own getaway location, perhaps in your favourite holiday area. It’s no wonder that this is a common choice for people looking for a property investment.

If you do this, you can claim tax deductions for your expenses when your holiday home is being rented out, but there are a few conditions.

Here are a few basic facts about tax deductions for holiday home investment properties:

  1. Your holiday home expenses are deductible only when it’s rented or available

Chances are, if you have a holiday home that’s also available for holiday rentals, it will be rented out sometimes, empty sometimes, and occupied by you at other times. You can claim deductions during the periods of time that your home is rented out or empty and available.

This means that you can’t claim deductions when you are enjoying your holiday home yourself, or if it’s not currently available.

But, you can usually claim deductions if your holiday home is being rented out, or if it’s currently empty but is being advertised genuinely.

  1. Your holiday home must be genuinely available for holiday rentals to qualify for deductions

If it’s difficult or unlikely for someone to rent out your holiday home, you can’t claim expenses. Here are some situations in which this might apply:

  • Your holiday rental is listed above the market value for holiday rentals in the area
  • Your holiday rental is not in demand during the periods it is listed for rent
  • Your holiday rental is difficult for potential tenants to access or rent

If you’re unsure about whether or not these conditions apply to you, it’s a good idea to check with a professional.

  1. Your deductions might be limited if family or friends are staying for a discounted rate

If you invite family or friends to stay in your holiday home for less than the market value, you can’t claim more deductions than the value of the rent you collected. So, if your expenses are more than the amount you charged your visitors in rent, you will have some expenses that you can’t claim.

These are just a few general points about holiday home investment properties. For more information about your specific circumstances, it’s a good idea to speak with a tax professional. And, don’t forget to keep your receipts for your expenses.

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