Owners and prospective buyers of vacation homes may wish to consider the advantages of earning rental income. If your property at Grande Villas or elsewhere is going to sit unoccupied for long stretches between your stays, turning it into a rental can be a smart way to put your investment to work. While you may not quite manage to make the vacation home pay for itself as some real estate investors would dream of, the extra income and tax benefits can represent a very attractive proposition.

The key consideration before getting into the rental game is the amount of time you wish to rent out your property. If you rent it for less than 15 days in a year, whatever income you collect from it is completely tax-free. This can be an appealing option for those only interested in short-term arrangements, and it can pay off handsomely if the second home is located near a popular attraction (like an annual festival or golf tournament) that can command peak rental rates. Of course, if you don’t have to report your rental income, that means you can’t claim any rental-related expenses as deductions.

If you rent your property for 15 or more days a year, then the IRS considers it a rental business and you must report the income. In this case, your costs on the home during rental periods can be deducted as business expenses. As long as you maintain personal use of the property as your vacation home, you can also continue to deduct your mortgage interest and property taxes. That may sound like a win-win, but becoming a landlord carries a lot of responsibilities and liabilities that you should carefully review with your accountant or attorney before jumping in.

Check out these links for further general information:

H&R Block Tax Tips: Owning a Second Home

SmartMoney: Property Taxes on Vacation Homes & Timeshares

Buyers Utopia: Vacation Rental Home Investment Property