If you own a vacation home, consider renting it occasionally. The payoff can be tax-free income. Under the Internal Revenue Code, you can rent your home for up to 14 days a year and owe no tax at all on that income.
Thus, you can pocket thousands of dollars of tax-free income if your home is near a major golf tournament, for example, or in an area near ski slopes. (The same rule applies if you rent your primary residence for up to 14 days a year.)
Because of this tax law, it doesn’t make sense to rent your home for, say, 15 or 16 days in a year. If you do, all the income will be taxable, not just the amount you receive for the 15th and 16th days.
Of course, if you don’t declare taxable income you can’t deduct expenses related to that rental effort, such as advertising costs. Nevertheless, you still can take your normal deductions, such as mortgage interest and property tax payments.