How to enter a vacation home for Schedule E in Lacerte

Follow these steps to enter vacation home expenses:

1. Go to Screen 18, Rental & Royalty Income (Schedule E).
2. Select Vacation/Short-Term Rental from the Type of Property dropdown.
3. Enter the Number of days rented.

   

   
   

4. Scroll down to the Income section.
5. Enter the amount received in Rents or royalties received.
6. Scroll down to the Expenses section.
7. Enter the applicable expenses in the Direct or Indirect columns.
   • Expenses entered in the Direct column can calculate a loss or gain and should only be entered for the rental part of the property.
   • Expenses entered in the Indirect column won't calculate a loss or gain and should be entered for the vacation home part of the property.
8. Scroll down to the Personal Use of Dwelling Unit (Including Vacation Home section.
9. Enter the Number of days personal use.
10. Enter the Number of days owned (if optional method elected).
    • To apply an optional business use percentage only to indirect mortgage interest and real estate taxes, enter the number of days that the vacation home was owned. This entry becomes the denominator when calculating the percentage of business use to apply to indirect mortgage interest and real estate taxes.
11. Complete all other applicable information for this rental.

Depreciation: All assets in Screen 22, Depreciation should be linked to Form 11, = Schedule E (vacation home) rather than Form 3, = Schedule E (rental) in order to properly apply depreciation to the vacation property, there is a disagreement between the IRS and the Tax Court in figuring how mortgage interest and real estate taxes should be allocated between Schedules E and A. The IRS' ratio is arrived at by dividing the number of days rented by the total number of days used (rental days plus personal days). The Lacerte program uses this method when you enter the applicable percentage in Percent of Business Use. The Tax Court has said that interest and taxes should be allocated over a full year; therefore, this ratio is arrived at by dividing the number of rental days by 365. You may elect this method by making the appropriate entry in Number of Days Owned (If Optional Method Elected). See Paragraph 966 of the Primary Tax Guide for more information.

For vacation home purposes, Lacerte calculates percentage of business use by dividing the number of days rented by the sum of the number of days rented plus the number of days of personal use. The program applies this percentage to all indirect expenses, including indirect mortgage interest and real estate taxes.