If you own a vacation home, you can rent it for up to 14 days per year and have no obligation to report the rental income. It makes no difference how much money you receive.
However, if you go over the 14-day mark, rental income will be taxable. So it probably doesn’t make sense to rent your vacation home for a few days in excess of the 14-day limit.
What if your rental expenses exceed your income? In order for you to deduct losses from renting out your vacation home, you have to show that you’re attempting to make money. Activities that are not aimed at making a profit are deemed to be hobbies, by the IRS, and cannot generate deductible losses.
The IRS presumes that an activity is not a hobby if profits result in any three of the five previous years. Thus, if your vacation home rental shows profits, more years than not, you probably can deduct rental property losses in the other years.
If you can’t show profits in most years, though, don’t be discouraged. You can show that renting your vacation home is a business, not a hobby, if you keep records showing that you approach your vacation home rental activities in a businesslike manner, trying to make a profit.