Many of us here in Maine are lucky enough to have a camp on one of Maine’s many lakes and ponds. What are the tax implications of renting it out for a few weeks or weekends?
The good news is that if you rent out your second home for 14 or fewer days a year, all of the rental income you receive for those 14 days is tax free. You do not have to report this income and cannot deduct any rental expenses related to that period for federal tax purposes. So when the Olympics come to Maine, we are all in for a windfall.
If you stay in your summer home (or ski condo) for more than 14 days but also rent it things get a bit more complicated. Under this scenario, you would be required to report any rents received, but you would also claim expenses related to your rental activities. The guidance for how to allocate your expenses falls under the vacation home rules, click here
And let’s not forget about the State of Maine. The State of Maine requires you to pay a sales tax of 7% on “casual rentals” of vacation homes rented out for 15 days or more. In order to file and pay the sales tax you would need to register with Maine Revenue Service. There are some exceptions such are renting to a sales tax exempt organization; property rented to a person for 28 continuous days as a permanent residence; or renting to someone on assignment for a temporary job or education purposes. For more information about the Maine Sales Tax on Casual Rentals, click here.
Should you have any questions about how to treat your rental please give us a call to discuss.