For example, if you rent out your vacation home only for a short time (fewer than 15 days a year), you may not have to report it at all. That means generally, if you rent out your vacation home for two weeks a year or less, your rental income is tax-free and you won’t need to show it on your return. Also, if you itemize deductions on Schedule A, you may be able to claim qualified mortgage interest, property taxes you pay, and eligible casualty losses.
On the other hand, if you rent your home for 15 days or more during the year, the law is clear that the rental income you receive is always taxable. That means you must report it on your tax return using Schedule E. Also, the rules for claiming your expenses are more complicated. Different factors come into play, like the number of days you rent your home, compared to how long you use it yourself. That affects how much you can deduct from your taxes, which expenses you can claim, and how you report them.
IRS Publication 527 has information on renting vacation homes, including a worksheet and examples. You can find it by going to IRS.gov/homerental.