Personal use vs rental: how IRC 280A classifies your home
Section 280A of the tax code governs a dwelling used partly for personal purposes and partly rented out. Two day counts decide how your vacation home is treated for the year: how many days you rented it, and how many days you personally used it.
If your personal use exceeds the greater of 14 days or 10% of the days the home was rented at fair market value, the IRS treats it as a "dwelling unit used as a residence," and your deductible rental losses are limited: expenses are allocated between personal and rental use, and rental deductions generally cannot exceed rental income for that "residence" case, so no net loss is allowed under the vacation-home rules. Keep your personal use below that threshold and the home is treated more like an ordinary rental property for loss purposes, with the separate passive-loss rules below applying instead.
What is the 14-day rule?
If you rent the home for 14 days or fewer during the year, all of that rental income is excluded from gross income entirely and does not need to be reported on Schedule E. In exchange, you cannot deduct rental-specific expenses beyond the mortgage interest and property tax deductions you would be entitled to on the home anyway as a personal residence. This is sometimes called the "Augusta Rule." It only applies at 14 days or fewer; renting for a 15th day removes the exclusion for the whole year, not just that one day.
How are expenses allocated once you pass the 14-day rule?
Once the home is a 280A "residence" (personal use exceeds the greater of 14 days or 10% of fair-rental days), expenses are split between personal and rental use following an ordering rule in 280A(e): mortgage interest and property tax are allocated first, then operating expenses, then depreciation, with the total capped at whatever rental income remains after the earlier categories, so no net rental loss is allowed for that year in that "residence" case.
There is a genuine, disputed area worth flagging plainly rather than resolving quietly: the IRS method and the "Tax Court method" disagree about which denominator to use when allocating mortgage interest and property tax, days in the year versus days the home was actually used. The Tax Court method (days used as the denominator) is more taxpayer-favorable and widely used in practice, but this is not settled by a single clear IRS rule, so treat it as a question for a tax professional rather than something a calculator should silently pick for you.
What is the passive loss allowance, and does it phase out?
Separately from 280A, and only relevant once a property is not classified as a 280A "residence," the passive activity loss rules allow up to $25,000 of rental real estate losses to offset non-passive income, if you actively participate in managing the rental and own at least 10% of it. That allowance phases out 50 cents for every dollar of modified adjusted gross income above $100,000, and is fully gone at $150,000 MAGI ($12,500 allowance phasing out between $50,000 and $75,000 MAGI for married filing separately taxpayers who lived apart all year; married filing separately taxpayers who lived together get no allowance at all). These dollar thresholds are fixed by statute under IRC 469(i) and are not adjusted for inflation.
How much mortgage interest can I deduct?
The 2025 One Big Beautiful Bill Act made permanent the Tax Cuts and Jobs Act's $750,000 acquisition-debt cap on mortgage interest, rather than letting it revert to $1,000,000 after 2025 as prior law had scheduled. That cap applies combined across a qualified main home and second home together, not $750,000 per property, for debt incurred after 15 December 2017. Debt incurred on or before that date can remain grandfathered under the older $1,000,000 cap ($500,000 married filing separately).
OBBBA also made permanent the suspension of the separate home-equity-interest deduction: interest on debt not used to buy, build or substantially improve the home is not deductible, regardless of how the loan is labeled. One change works in the other direction for 2026: the private mortgage insurance (PMI) deduction, unavailable since it lapsed after 2021, is restored for tax years beginning after 31 December 2025, meaning it becomes available again starting with the 2026 tax year, subject to the same adjusted-gross-income phase-out mechanics that applied under the earlier rule.
| Item | 2026 figure |
|---|---|
| Acquisition debt cap (post 15 Dec 2017), combined main home + second home | $750,000 ($375,000 married filing separately) |
| Grandfathered acquisition debt cap (on/before 15 Dec 2017) | $1,000,000 ($500,000 married filing separately) |
| Home equity debt interest (not used to buy, build or improve) | Not deductible, permanently |
| PMI deduction | Restored starting the 2026 tax year, subject to its AGI phase-out |
What is the SALT cap in 2026?
OBBBA raised the combined state and local tax (SALT) deduction cap from $10,000 to $40,000 starting in 2025 ($20,000 for married filing separately), and property tax on a second home counts toward this same aggregate per-return cap alongside state income tax and your main home's property tax, not a separate limit per property. The cap is indexed upward by roughly 1% a year through 2029; the widely cited approximate 2026 figure is around $40,400, but this guide does not state that as a settled number, since it could not be independently confirmed against the IRS's own 2026 inflation-adjustment guidance this session. Confirm the exact 2026 indexed dollar figure directly with the IRS before relying on it.
The $40,000 base cap phases down for taxpayers with modified adjusted gross income above $500,000 (a threshold that is itself indexed roughly 1% higher each year through 2029): the cap is reduced 30 cents for every dollar of MAGI above that threshold, but never falls below a floor of $10,000, the old pre-OBBBA cap. Absent further legislation, the entire $40,000 structure, phase-down included, sunsets in 2030, reverting to a flat $10,000 cap with no income-based phase-down.
| Item | Figure |
|---|---|
| SALT cap, 2025 | $40,000 ($20,000 married filing separately) |
| SALT cap, 2026 | Indexed roughly 1% higher; exact figure not independently verified, commonly cited near $40,400 |
| MAGI phase-down threshold | $500,000, indexed roughly 1%/year through 2029 |
| Phase-down rate | 30 cents per dollar of MAGI above the threshold |
| Floor | $10,000 (cap never drops below this regardless of income) |
| Sunset | Reverts to a flat $10,000 cap, no phase-down, starting 2030 |
Work out your own numbers
- Vacation-home running-cost calculatorSee what a full year of ownership actually costs.
- Second-home affordability calculatorCheck what you could carry before you buy.
- Second-home capital gains calculatorEstimate tax due if you sell later.
- Family property cost splitSplit ownership costs fairly among co-owners.
Common questions
Does the 14-day rule apply per property or per year?
It is measured per property, per calendar year, counting the actual days that specific home was rented at fair market value during that year. Exceeding 14 days removes the exclusion for the entire year, not just for the days beyond 14.
Can I deduct a loss on my vacation home if I use it myself part of the year?
It depends on how many days you used it personally versus rented it. If your personal use exceeds the greater of 14 days or 10% of the days rented at fair value, the home is a 280A "residence" and no net rental loss is allowed for that year; expenses are capped at rental income after interest and taxes are allocated. Stay under that personal-use threshold and the separate passive-loss rules, including the $25,000 allowance and its phase-out above $100,000 MAGI, can apply instead.
Is the mortgage interest cap per home or combined?
Combined. The $750,000 acquisition-debt cap (or $1,000,000 for grandfathered pre-16-December-2017 debt) applies across your qualified main home and second home together, not $750,000 for each property separately.
Sources
- 26 U.S.C. 280A, Cornell Legal Information Institute, checked 15 September 2026.
- IRS Publication 527, Residential Rental Property, checked 15 September 2026.
- IRS Publication 925, Passive Activity and At-Risk Rules, checked 15 September 2026.
- IRS Publication 936, Home Mortgage Interest Deduction, checked 15 September 2026.
- One Big Beautiful Bill Act, H.R. 1, 119th Congress, checked 15 September 2026.
Last reviewed 15 September 2026. Next review March 2027. Written by the OwnersLog team from the official sources listed above. No professional reviewer is named on this page yet. The exact 2026 SALT cap dollar figure and the days-in-year versus days-used interest allocation dispute are noted above as unsettled rather than stated as fact.
This guide is general information about how the rules work, not financial, tax, legal or mortgage advice, and it cannot account for your circumstances. Confirm anything that matters with a qualified professional. See the full disclaimer.