The IRS definition of a "dwelling unit" plays an important role in the tax treatment of vacation homes. Learn more in this TaxBuzz Guide.

For purposes of the vacation home rules, a dwelling unit is property that provides basic living accommodations, including sleeping space, toilet, and cooking facilities. A single structure may contain more than one dwelling unit.

If a taxpayer rents rooms or other space in a home and the rented portion does not have facilities that would make it a dwelling unit on its own, the taxpayer and the renter may be considered to be occupying one dwelling unit, and loss on the rental may be disallowed under §280A. This does not apply to hotel or motel units, etc., regularly available for occupancy by paying customers, but may apply to a portion of a home used to furnish lodging to tourists or to long term boarders, such as students.