Tips and definitions: Vacation home purchase scenario
Unusable weeks are weeks that the house can not be used by anyone --
it can not be rented, and you can not live in it.
For example, winter weeks in an unheated beach house.
Unusuable weeks effects your rental fraction. IRS rules suggest
that the rental fraction is the number_of_days_rented/365.
However, tax courts have been interpreting this as
number_of_days_rented/number_of_days_used; where number_of_days_used
is the sum of rental and personal use days.
For example:
- If you rent for 8 weeks
- You (including family and friends) use it for 12 weeks
Then the rental fraction would be...
- using the IRS rule: 8/52= 15%
- using the tax court rule: 8/(8+12)= 40%
Given that the tax court ruling stands for the forseeable future, and since you can always claim to be using the house (even in the "dead of winter")
the choice of unusable weeks is a function of whether expanding
your yearly expenses due to rental offsets losses in pro-rated non-rental deductions
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