If you own a vacation home, you undoubtedly derive personal pleasure from this valuable asset. But the current economy could be putting a strain on your resources.

Know that special tax rules apply if you decide to rent out the home for part of this year. These rules affect longtime landlords, as well as those renting for the first time.

Background: The rental income received from a vacation home can offset some of the costs of ownership. Of course, the income is taxable, but you may claim offsetting deductions for a portion of your expenses. For instance, if you rent out the home for 80% of the time and use it personally for 20% of the time, you can deduct 80% of your insurance, repair costs, depreciation on the home and so forth.

If you incur a loss on the rental--your rental-related expenses (including mortgage interest and property taxes allocable to the rental) exceed the income--the tax picture is not as clear. Under the passive activity loss rules, you can use losses from a rental activity only to offset losses from other passive activities. However, if you are an active participant in the rental (e.g., you make management decisions), the tax consequences depend on your income level and the level of your family's personal use.

• If your adjusted gross income (AGI) does not exceed $100,000, you can use the loss to shelter up to $25,000 of your salary and other income, as long as you keep personal use below the greater of 14 days or 10% of the rental time. However, you cannot deduct the mortgage interest allocable to your personal use.
• If your AGI exceeds $150,000, you do not qualify for the $25,000 loss write-off. Your total rental deductions cannot exceed your rental income, regardless of the amount of your personal use. If your personal use is greater than 14 days or 10%, you may benefit from an additional deduction for the portion of the mortgage interest not claimed as a rental expense.
• If your AGI is between $100,000 and $150,000, the $25,000 loss write-off is phased out. The closer you are to the $150,000 level, the less you will receive for a loss write-off. So you may want to increase your personal use as those with an AGI above $150,000 might do. Result: You will be able to deduct more of your mortgage interest.

If, on the other hand, you are close to the $100,000 level, most of your loss write-off will remain intact. Therefore, you should try to keep your personal use below the 14-day/10% mark.