The IRS has provided guidance regarding whether vacation homes qualify for a 1031 exchange, and not a moment too soon — vacation homes are becoming the trend in Texas among baby boomers.
According to a new IRS ruling, the property must first be held by the taxpayer for 24 months to qualify for a 1031 exchange.
In addition, during each 12-month block of this holding period, the owner must have rented the vacation home for at least 14 days at a fair market rent. Also during each 12-month block, the owner is only allowed to use the property for the greater of 14 days or 10 percent of the days rented.
Owners are also allowed a reasonable number of “maintenance days” to care for the unit.