What Tax Deductions Can I Take on My Vacation Condo?

(MoneyWatch)  Dear Ali:
My wife and I have a vacation home in Florida that we rented out for part last year. Are there tax deductions that we can take against the income?
A: Ah, taxes! Welcome to the wonderful world of Schedule E, used to report income or loss from a rental. I owned a two-family home for seven years, so I got a little more familiar with this than I'd like.

If you rent your vacation home out for more than two weeks, you have to report that income to the IRS. But the upside is that there are all sorts of deductions you can take. I'd recommend going to an accountant, but John Garrett, who is a RE/MAX real estate agent at Lake of the Ozarks, has a good list of tax deductions, and Nolo, which is a legal publishing house, has another strong list of tax deductions from attorney Stephen Fishman. Some highlights:

• Mortgage interest. Perhaps this goes in the "duh!" category, because it's the largest and most obvious expense, but interest costs on your loan should be deductible up to the first million. If you simply own a primary home, you take this deduction on Schedule A, but if you have a rental business, you split the deduction between Schedules A and E depending on what percent of the property is personal use and what percent is business.
• Depreciation. You can't depreciate land (cue Gone With the Wind: "it's the only thing that lasts"), but you can depreciate buildings on the land, such as houses and condos, which can generate some nice little tax losses. Just be aware that this will reduce your basis, so you may report greater capital gains when it comes time to sell.
• Utilities. Are you paying for the property's heat or electricity? Hello, tax deduction!
• Transport. Did you run to Wal-Mart to buy a new toilet seat for the rental? Deductible! If you're not doing your own maintenance but letting a property manager do it, that's deductible, too.

I hope this list is of some help. Watch this space because in a couple of days I'll post "Tax Deductions for Primary Homeowners." I know tax time isn't fun, but just think ... in a week, you'll be done!