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what is the irs method of allocating expenses

what is the irs method of allocating expenses

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Expert Solution

Please find below answer :

As per Income tax 1991, the computation of allowable expenses deduction, the internal revenue service applies an allocation formula based on the percentage relationship between the number of days the property is rented and the total number of days the property is in used, including personal use days.

Sec280A(e)9(2), the IRS interprets Sec.280A(e) to mean all deductible expenses related to property are allocated between fair rental and personal use days based on the ratio of fair rental days to the total number of days used, not just the expenses that are deductible only in relation to the rental of property.

Example :

Ian rents out her vacation home for 91 days and use home for personal purpose on 30 days. The gross rental income from the unit is $3700 for the year. He pays$ 4000 in real estate taxes and mortgage interest on property. Expenses for maintenance, repair and utilities total $3000. The IRS days of use allocation of all expenses would be based on 75% (91 days rented divided by 121 days of used.)

ekkarill92 answered 1 year ago
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