Vacation or Rental Property Owners-Must Read!

July 16th, 2025 at 6:34 AM

If you own a vacation home or rent out a second property, there’s a tax case you should know about—one that could save you thousands of dollars in lost deductions.

Charles M. Akers owned a mountain cabin in Alpine, California, which he rented out through a property management company. He attempted to deduct over $20,000 in expenses on his tax return—but the court denied the deductions. Why? He didn’t follow the IRS rules for proving material participation or distinguishing between personal and rental use.

What Went Wrong?

Although Mr. Akers claimed he spent time maintaining the cabin, he had no logs, receipts, or documentation to back up those claims. Worse, the court reclassified his “maintenance visits” as personal use days—because he couldn’t prove otherwise. As a result,

• the IRS deemed the cabin a personal residence (not a rental),
• the limited rental use (12 days) triggered the 15-day rule, making it a non-taxable event, and
• he lost all potential rental deductions.

How to Avoid the Same Mistake

If you rent out a vacation home or second property—even part-time—be sure to

• keep detailed records of every maintenance task and business-related visit;
• track time spent by others, such as cleaners or repair services;
• understand IRS thresholds (e.g., the 14-day/10% rule, the 15-day rental rule); and
• plan your use and rentals proactively—not after the fact.

Plan Ahead

This case reinforces a critical point: proactive tax planning is essential. The IRS requires documentation, not good intentions. Whether your goal is to deduct expenses, reduce income, or stay compliant, clear records and strategy are your best defense.

Mark S. Fineberg, CPA