Plain-English definition
IRC §280A is the rule that says: if you personally use a rental property too much during the year, the IRS treats it as a residence — not a rental — for tax purposes. Once that switch flips, your rental deductions are capped at your rental income for the year. You can no longer use the property to generate a net loss that offsets other income, and the cost-segregation acceleration you paid for becomes worthless that year.
The “too much” threshold is greater of 14 days or 10% of rental days. That’s it. Two-week summer vacation in your Joshua Tree Airbnb? Counted. Long weekend with family at the Park City condo every quarter? Counted.
§280A is independent of, and stacks on top of, the passive-activity rules under §469. A short-term rental can pass the §469 STR ≤7-day-average test and still get killed by §280A. The two tests trap STR owners separately.
What the law says
“For purposes of this section, a taxpayer uses a dwelling unit during the taxable year as a residence if he uses such unit (or portion thereof) for personal purposes for a number of days which exceeds the greater of— (A) 14 days, or (B) 10 percent of the number of days during such year for which such unit is rented at a fair rental.”
The deduction limit is in §280A(c)(5):
“In the case of a use described in paragraph (1) [business use], (3) [rental], or (4) [day-care], and in the case of a use described in paragraph (2) [residence] if such use occurs during a taxable year in which such unit is used as a residence, the deductions allowed under this chapter for the taxable year by reason of being attributed to such use shall not exceed the excess of— (A) the gross income derived from such use for the taxable year, over (B) [non-280A expenses].”
In plain English: when §280A applies, rental expenses (other than mortgage interest and property taxes, which are deductible elsewhere) cannot exceed gross rental income. The excess carries forward to future years.
The 14-day / 10% test, worked
The test compares personal-use days to fair-rental days and uses whichever bar is higher:
| Fair-rental days | 10% of rental days | The §280A threshold (greater of 14 days or 10%) |
|---|---|---|
| 50 days | 5 days | 14 days |
| 140 days | 14 days | 14 days (tied) |
| 200 days | 20 days | 20 days |
| 300 days | 30 days | 30 days |
A heavily-booked STR (200+ rental days) has a slightly higher tolerance for personal use (20+ days) before §280A applies. A lightly-booked vacation home (50 rental days) is capped at 14 personal-use days regardless.
The personal-use number is what kills most owners. Here’s what counts:
| Use type | Counts as personal day? |
|---|---|
| Owner stays at the property | Yes |
| Spouse, children, parents, siblings stay | Yes (regardless of whether they pay rent) |
| Adult child stays and pays fair-market rent | Yes — §280A(d)(2)(A) treats relatives as personal use even with FMV rent (use as principal residence is an exception) |
| Owner stays and spends the day doing repairs (principal purpose) | No — §280A(d)(2) flush language excludes bona fide repair days |
| Owner rents to unrelated third party at below-FMV rent | Yes (any below-FMV rental is personal use) |
| Owner uses time-swap or “vacation home exchange” with another owner | Yes — §280A(d)(2)(C) treats exchange days as personal |
| Property is rented at FMV to an unrelated party who uses it as principal residence | No (subject to facts and circumstances) |
The principal-residence exception in §280A(d)(3) is narrow: it applies when the rental is to a person who uses the unit as their principal residence at FMV. It does not save an owner who lets a family member stay for free, even for one weekend.
Interaction with cost segregation and §168(k) bonus
Cost segregation studies on STR properties typically reclassify 25–35% of basis into 5/7/15-year property, all of which is eligible for 100% bonus depreciation under §168(k) for post-Jan-19-2025 placed-in-service property. On a $700,000 STR with 30% reclass, that’s $210,000 of year-1 deduction.
If §280A applies that year, the entire $210,000 deduction is capped at rental income. A $700K STR generating $70,000 of gross rents produces — with mortgage interest, taxes, insurance, utilities, management fees, and the cost-seg depreciation — far more than $70,000 of allowable expenses. Under §280A, deductions stop at $70,000. The remaining cost-seg depreciation does not disappear — it carries forward — but the year-1 tax benefit collapses from a six-figure loss into zero.
This is why pre-purchase planning matters more than post-purchase optimization. An STR investor who plans personal vacations into their underwriting model needs to know whether those vacations push the property over the 14-day threshold before spending $1,295 on a cost-segregation study.
Mortgage interest allocation: Bolton vs. IRS method
When §280A applies, mortgage interest and real estate taxes are allocated between rental and personal use. The allocation method affects how much rental-deductible expense remains under the §280A(c)(5) cap.
IRS method (Pub 527): allocates by (rental days ÷ days actually used). If a property is rented 140 days and used personally 30 days, the IRS method allocates 140 ÷ 170 = 82.4% of mortgage interest to the rental side.
Bolton method: allocates by (rental days ÷ 365). The same property: 140 ÷ 365 = 38.4% of mortgage interest to the rental side.
The Bolton method shifts less mortgage interest to the rental side — which sounds bad until you account for §280A(c)(5)‘s ordering rule. Under §280A, allowable rental deductions are taken in a strict order: (1) “Tier 1” expenses (mortgage interest, property taxes — items that would be deductible regardless of rental use), (2) “Tier 2” expenses (operating expenses other than depreciation), (3) “Tier 3” depreciation. Each tier is limited by what’s left of the gross-income cap after the prior tier.
By allocating less mortgage interest to the rental, Bolton leaves more room under the cap for Tier 2 operating expenses and Tier 3 depreciation — including cost-seg depreciation. The unused personal-side mortgage interest is then deducted on Schedule A (if the property is a qualified second residence) where there is no §280A cap.
Authority for Bolton:
- Bolton v. Commissioner, 77 T.C. 104 (1981), aff’d 694 F.2d 556 (9th Cir. 1982). Held that “days used” in §280A(e)(1) refers to days in the year, not days of actual occupancy.
- McKinney v. Commissioner, 732 F.2d 414 (10th Cir. 1983). Followed Bolton in the Tenth Circuit.
- IRS Action on Decision 1984-007 (Sep 24, 1984). IRS announced nonacquiescence and continues to litigate the issue in other circuits.
In the Ninth and Tenth Circuits, Bolton is binding. In other circuits, taxpayers using Bolton should be prepared for potential challenge but have multiple favorable precedents.
The §280A “minor repairs” carve-out
§280A(d)(2) flush language excludes from personal use any day “on which the principal purpose of the use of such unit is to perform repair or maintenance work on such unit.” Three points often missed:
- Principal-purpose test. The repairs must be the dominant activity that day, not a token gesture during a vacation. The Tax Court has been skeptical of self-serving claims; contemporaneous logs of repair activities help.
- The taxpayer’s family members get the same treatment. A spouse who travels to the property and spends the day painting falls under the same carve-out per §280A(d)(2)(B).
- Travel days separate from repair days. A day spent traveling to the property is not a repair day even if repairs happen later. The day-counting rules look at the principal use of the calendar day.
A common, audit-defensible pattern: scheduled annual maintenance trip (deep clean, season-change repairs, paint touch-up, inventory replacement) with a written work list completed and photographed. Two such trips per year — each two to three days, properly documented — can keep an active-managing owner under the 14-day personal-use cap.
Common failure modes
- Treating any below-FMV rental as zero use. It’s not zero — it’s personal use. A weekend “rented” to a friend for $50 is personal use, not rental.
- Forgetting the relative rule. Even FMV rental to a sibling or parent counts as personal use unless the relative uses the unit as a principal residence. §280A(d)(2)(A) is unforgiving on this.
- Mid-year purchases. A property purchased July 1 has only 184 days available. 14 personal-use days is a much higher percentage of available days than in a full year — but the absolute 14-day floor still applies, so partial-year owners often trip §280A unintentionally.
- Trying to fix it with §469. §280A and §469 are independent. Passing the STR loophole or REPS exception does not exempt a property from §280A. The two regimes apply on top of each other.
- Ignoring the carryforward. Disallowed §280A deductions don’t evaporate — they carry forward and become deductible in a future year when the property isn’t a “residence” (or when there’s enough rental income to absorb them). For a property an owner plans to convert to pure rental in 2-3 years, the §280A carryforward becomes a meaningful future-year asset.
Sources
- Statute: 26 U.S.C. § 280A — Cornell LII
- Regulations: Treas. Reg. § 1.280A-1 and § 1.280A-3 (proposed)
- Case law:
- Bolton v. Commissioner, 77 T.C. 104 (1981), aff’d 694 F.2d 556 (9th Cir. 1982) — mortgage interest allocation method
- McKinney v. Commissioner, 732 F.2d 414 (10th Cir. 1983) — Tenth Circuit follows Bolton
- IRS guidance: IRS Pub. 527 — Residential Rental Property (Including Rental of Vacation Homes); Action on Decision 1984-007 (IRS nonacquiescence on Bolton)
- Related rules: IRC §469 (passive-activity rules); IRC §168(k) (bonus depreciation); Pub. 5653 (Cost Segregation Audit Techniques Guide)
Owner planning to use a vacation rental personally? Run the §280A math before buying. The 14-day / 10% threshold is a function of how often you book the property and how many days you visit. A property-by-property model shows year-1 cost-segregation impact in the unrestricted scenario; if §280A may apply, plan personal-use days into the underwriting before ordering a study.