Schedule E Fair Rental Days and Personal Use: 14-Day Rule

What are fair rental days on Schedule E line 2?

Fair rental days are the days a property was rented at a fair rental price. Personal use days are the days you, your family, a co-owner or someone paying less than a fair price used it. Schedule E line 2 asks for both counts for each rental property, and the two counts decide three separate things:

If nobody used the property for personal purposes and every rented day was at a fair price, there are no personal use days and no day split: all of its expenses are rental expenses. Days a property was listed but sat empty are in none of these counts. These federal rules under section 280A cover a house, apartment, condominium, mobile home, boat or similar property; a state return and local lodging taxes follow their own rules.

A case is not simple when stays were free or discounted, a co-owner used the property, there was a house swap, the return shows a loss, there are several properties, earlier years were filed on a rough count, or a payment platform's Form 1099-K does not match your calendar of nights. Gather a calendar of every night, who stayed and what they paid, and the year's expense totals before counting.

A host who gives significant services to guests, such as maid service, reports on Schedule C instead (Schedule E instructions); see Schedule C or Schedule E for a host.

What counts as a personal use day?

A personal use day is any day, or part of a day, that the property is used by you or someone the rules treat as you (Schedule E instructions; Publication 527).

A cousin or in-law is not "family" under this definition, but a discounted or free stay by anyone is still personal use.

Which days do not count as personal use?

Two kinds of days are left out: repair days and, for the home test only, main-home days before or after a long rental (Publication 527).

• Repair and maintenance days. A day spent working substantially full time repairing and maintaining (not improving) the property is not personal use, even if family members use it for recreation that day.
• Main-home days before or after renting. Days you lived there as your main home before or after a period of 12 consecutive months or more, during which it was rented or held for rent at a fair price, do not count as personal use. After a shorter such period that ended in a sale or exchange, only the days before it are left out (section 280A(d)(4)).

The second rule does not change the expense split. Costs for the time you lived there stay personal, and rental expenses and depreciation start on the day the property changed to rental use.

Do I divide by days rented, days listed or 365?

Divide by days used: rental days plus personal use days. Days a property was available for rent but not rented are not rental days, and the IRS does not divide by 365 (Publication 527; section 280A(e)). Publication 527 and its worksheet divide every shared cost this way, including mortgage interest and real estate taxes. The statute's day limit does not apply to deductions allowable whether or not the unit was rented (section 280A(e)(2)), so a different split of those two costs may be possible. This page follows the IRS method.

For example, a property listed for 120 days, rented 60 of them and used personally for 30 other days has a rental share of 60 of 90 days. It is not 60 of 120 listed days or 60 of 365.

Two days need care:

• A day rented at a fair price that you also used. For example, a renter lets you use the property for a weekend with no refund. It is a rental day for the expense split, but a personal use day for the home test.
• A day rented below a fair price. It is a personal use day for both. It is still a rented day for the 15-day rule below.

How do I split mortgage interest, taxes, insurance, utilities and repairs?

Split each cost that serves both uses by the rental share of days, and assign a cost that serves only one use to that use. This applies whether or not the property counts as a home (Schedule E instructions; Publication 527).

If you itemize, the personal share of mortgage interest and real estate taxes can go on Schedule A, subject to its limits. Mortgage interest on a rented second home counts there only if the property is used as a home, as the next section defines it, and only for the one second home you choose to treat as qualified (Publication 936). The personal share of other costs is not deductible (Topic no. 415; Publication 527).

When does a rental count as my home, and what changes?

A property is used as a home when your personal use exceeds the greater of 14 days or 10% of the days it was rented to others at a fair rental price (section 280A(d)). "Used as a home" is a tax term for your personal use days; you do not need to live there. The percentage side is the higher bar only once fair-price rental days pass 140. For this test, a day you also used the property counts as personal use, not as a rental day.

For the passive loss rules, depreciation and repair-or-improvement questions, see rental property taxes.

I rented fewer than 15 days: do I report the rent?

Not if you used the property as a home. Then you do not report the rent, do not deduct rental expenses and do not list the property on Schedule E. Mortgage interest, real estate taxes and casualty losses follow the usual Schedule A rules (Schedule E instructions; Publication 527).

For this exemption, count every day the home was actually rented to anyone, at any price, including paid below-market stays and rented days you also used (section 280A(g)). That total can be higher than the fair rental days on line 2. Worksheet 5-1 asks about fair-price days, but the statute says "actually rented" and governs.

It covers a main home as well as a second home: if you live in the house and rent it out for fewer than 15 days, your own days there are personal use, so the first condition is met (section 280A(g)).

The rule needs both conditions. A second home used 10 days and rented 10 days is not used as a home, because 10 is not more than 14, so the rent is reported and expenses are split. A home used 45 days and rented 14 days at a fair price plus 1 day at a discount was rented 15 days, so the rent is reported.

If a payment platform reported those payments on a Form 1099-K, see reconciling a Form 1099-K with your rent.

I used it as a home and rented 15 days or more: how much of a loss can I deduct?

Report all the rent. If the rent is more than the rental share of expenses and depreciation, deduct all of them and skip the worksheet. If expenses are more, operating costs and depreciation can only reduce the rent to zero, not create a loss, and the unallowed amount carries to next year (Publication 527).

A home rental is not a passive activity (Publication 925). This limit, not the passive loss rules, blocks the excess, and the excess cannot offset other income. For a net loss, use Worksheet 5-1 in Publication 527, which allows expenses in this order:

1. First, in full: direct rental costs such as agent fees and advertising, and, if you itemize, the rental share of mortgage interest, real estate taxes and casualty losses. Generally only a loss from a federally or state declared disaster counts as a personal casualty loss (section 165(h)).
2. Second, up to the rent left after the first group: operating costs such as repairs, insurance and utilities. A filer who takes the standard deduction puts the rental share of mortgage interest and real estate taxes here, and so does an itemizer for any part above the Schedule A limits.
3. Third, up to what is left after the second: depreciation and any casualty loss not allowed in the first group.

Anything not allowed carries forward to the same group next year, under that year's limit, even if you do not use the property as a home that year.

How do I split costs when I rent a room or part of my house?

Treat the rented part as if it were a separate property. Split shared costs by any reasonable method, most often floor area or number of rooms, and treat costs only for the rented part as fully rental (Publication 527).

The day split above applies only when the rented part also has personal use. If you rent a room full time and never use it, there are no personal use days: split shared costs by area or rooms and report an ordinary rental, with its fair rental days and zero personal use days on line 2. A guest room you rent on some weekends and use yourself on others has its own rental days and personal use days. A room that is regularly available to paying guests and that an owner does not use as a home is treated as hotel-like space, not a dwelling unit, so the day split and home limits do not apply to it.

Is renting to a relative or below market personal use?

Usually yes: a day rented to anyone at less than a fair rental price is personal use, relative or not (Publication 527). The table above shows the one family exception.

A fair rental price is generally what an unrelated person would pay. Rent substantially below similar properties nearby is not fair; compare use, size, condition, furnishings and location. Separately, a rental that is not run to make a profit is not a Schedule E rental: report the rent on Schedule 1 (Form 1040), line 8j, with no rental expense deductions. An itemizer can still take mortgage interest (on a main or second home), real estate taxes and casualty losses on Schedule A (Publication 527). In a year you used the property as a home, section 280A applies instead of this rule (section 280A(f)(3)). A new rental can postpone the profit question by filing Form 5213 within 3 years after the due date of the first year's return, or within 60 days after an IRS written notice proposing to disallow the deductions, whichever is earlier.

Example

These examples use US dollars and round numbers.

Lake cabin with a free family stay

A cabin is rented at a fair price for 60 days. The owner uses it 20 days and a sibling stays 10 days free, so personal use is 30 days. The rental share is 60 of 90 days, two-thirds.

Yearly expenses are US$12,000: mortgage interest 4,500, property tax 1,500, utilities, insurance and repairs 3,000, and depreciation 3,000. By the IRS method, the rental share is US$8,000: interest 3,000, tax 1,000, operating costs 2,000 and depreciation 2,000. The other US$2,000 of interest and tax is personal and goes to Schedule A if the owner itemizes.

Personal use of 30 days is more than the greater of 14 days or 6 days (10% of 60), so the cabin is used as a home. Rent received is US$6,000:

• If the owner itemizes, interest and tax of 4,000 are allowed first, leaving 2,000 of rent.
• Operating costs of 2,000 fit within that.
• Depreciation of 2,000 is not allowed this year and carries forward.

Schedule E shows rent of 6,000 and expenses of 6,000, so no income and no loss. Under the standard deduction, interest and tax move to the second group and the result is the same here.

Condo rented for a festival

A condo is rented at a fair price for 10 days during a festival and brings in US$4,000. The owner used it 45 days. That is more than the greater of 14 days or 1 day (10% of 10), so it is used as a home. Rented fewer than 15 days, the US$4,000 is not reported and no rental expenses are deducted. Mortgage interest and property tax follow the Schedule A rules.

A former home rented for a year

An owner lives in a house until March 31 of Year 1, rents it at a fair price from April 1 of Year 1 through March 31 of Year 2 (12 months), then moves back.

• Year 1: The January to March days as a main home are not personal use, because the rental lasts 12 consecutive months, so the year is a regular rental. Rental expenses and depreciation start April 1, so nine-twelfths of yearly costs such as mortgage interest, property tax and insurance are rental expenses. The January to March share of interest and tax is personal, for Schedule A if the owner itemizes. Depreciation is figured on the lesser of the home's fair market value or adjusted basis on April 1 (Publication 527; see rental property taxes).
• Year 2: The January to March rental is a regular rental. The days after the move back are not personal use. Rental expenses cover only the three rental months.

Different for you?

• The day count drives a loss, or earlier years were filed on a rough count: the totals decide the loss and what carries forward, and a wrong count in a filed year may need an amended return. See amending a return for expense mistakes and get individual tax help.
• You have co-owners, several properties or an LLC that owns the property: line 2 has its own counts for each property, and a co-owner's days count against every owner. See co-owned rentals and rental property in an LLC, and get individual tax help with the counts.
• You live in Canada and own this property: see Canadians with US rental property for what is filed in each country, the withholding on gross rent a payer may apply and the net-income election, and get cross-border tax help.
• You have no calendar or your books are behind: rebuild the days and costs from bookings, payouts and bank statements. See catching up on rental property books, rental property records and receipts and bookkeeping help.
• A Form 1099-K shows more than the rent you earned, or does not match your day log: follow the Form 1099-K guide and see recording payouts gross or net. If the totals still do not reconcile with your bookings, get bookkeeping help.
• You rent your home to your own company for a few days: see the Augusta rule.
• You want rental losses against wages: see the records for the short-term rental rules.
• You provide services to guests: see Schedule C or Schedule E for a host.
• You are selling a home you rented out: see the home-sale exclusion.
• Guests may owe sales or occupancy tax: see sales tax on rent.