26 U.S.C. § 280A — Disallowance of certain expenses in connection with business use of home, rental of vacation homes, etc.

(a) General rule
Except as this section otherwise allows, if a taxpayer^* is an individual or an S corporation^*, no deduction is allowed for using a dwelling unit that the taxpayer also uses as a residence during the year.

(b) Exception for interest, taxes, casualty losses, etc.
Rule (a) doesn't block any deduction that a taxpayer could take anyway, without needing a connection to a trade, business, or income-producing activity — such as home mortgage interest or property taxes.

(c) Exceptions for certain business or rental use; limits on those deductions
(1) Certain business use: Rule (a) doesn't apply to a part of the home that's used regularly and only as the main place for any of the taxpayer's trades or businesses; as a place where the taxpayer regularly meets patients, clients, or customers in the normal course of business; or, for a separate structure not attached to the home, in connection with the taxpayer's trade or business^*. For an employee^*, this only applies if the employer requires that exclusive use for the employer's convenience. "Main place of business" also includes a space the taxpayer uses for administrative or management work, if there's no other fixed location where the taxpayer does substantial administrative or management work for that business.
(2) Certain storage use: Rule (a) doesn't apply to space used regularly to store inventory or product samples for a retail or wholesale business, but only if the home is the sole fixed location of that business.
(3) Rental use: Rule (a) doesn't apply to a part of the home that's rented out (subject to subsection (e)).
(4) Day care use: Rule (a) doesn't apply to space used regularly in a trade or business providing day care for children, people 65 or older, or people who can't physically or mentally care for themselves — but only if the day care provider has applied for, holds, or is exempt from needing a required state license, certification, registration, or approval, and only for periods starting more than 90 days after the Tax Reduction and Simplification Act of 1977 was enacted. If the day care space isn't used only for that purpose, the deductible share is limited to the ratio of hours actually used for day care to hours the space was available for use.
(5) Limit on these deductions: For business, storage, or day-care use under (1), (2), or (4), and for rental use under (3) where the home is also used as a residence, total deductions for that use can't exceed the income earned from that use, minus deductions that would be allowed anyway (regardless of the use) and deductions allocated to the trade, business, or rental activity but not to that specific use. Any amount blocked by this limit carries forward as a deduction for next year, still subject to the same limit.
(6) Renting to your employer: Rules (1) and (3) don't apply to renting part of the home to your employer while you're using that space as an employee performing services for that employer.

(d) What counts as using the home "as a residence"
(1) In general: A taxpayer uses a dwelling unit as a residence during the year if personal use exceeds the greater of 14 days, or 10 percent of the days it's rented at a fair rental. A day the unit is used personally doesn't count toward the "rented at a fair rental" side of that ratio.
(2) What counts as personal use: A day counts as personal use if, for any part of that day, the unit is used by the taxpayer or anyone with an interest in it, or their family (as defined in section 267(c)(4)); by someone using it under a swap arrangement that lets the taxpayer use another unit; or by anyone else unless the unit is rented that day for a fair rental given the facts and circumstances (this exception doesn't apply to an employee using housing under section 119). The Treasury can write rules for when repair-and-maintenance use doesn't count as personal use — but even those rules can't let the Treasury treat a day as personal use just because other people are present while the taxpayer is doing repairs full time that day.
(3) Renting to a family member for their main home: A taxpayer isn't treated as using the unit personally just because it's rented, at a fair rental, to someone using it as their main home. If that renter also has an ownership interest in the unit, this only applies if the rental follows a "shared equity financing agreement" — an arrangement where two or more people hold ownership interests in the home, and the person living there as their main home pays rent to the other owner(s). Under such an agreement, fair rental is judged as of when the agreement was signed, taking into account the resident's ownership share. A "qualified ownership interest" means an undivided share of more than 50 years in the whole home and its land.
(4) Renting your main home: When applying the deduction limit in (c)(5) to a "qualified rental period" — either 12 or more consecutive months starting or ending in the tax year, or a shorter period ending when the home is sold — days before or after that period (or, for the shorter version, before it) don't count as personal use if the home was the taxpayer's main residence (as defined in section 121) on those days.

(e) Expenses tied to rental
(1) In general: If a taxpayer who is an individual or S corporation^* also uses the unit personally on any day of the year, deductible rental expenses can't exceed the share of expenses matching the ratio of days rented at a fair rental to total days the unit was used.
(2) Exception: This limit doesn't apply to deductions that would be allowed anyway, whether or not the unit was rented.

(f) Definitions and special rules
(1) "Dwelling unit" includes a house, apartment, condominium, mobile home, boat, or similar property, along with anything attached to it — but not a part of it used only as a hotel, motel, inn, or similar business.
(2) For an S corporation, the personal-use rules in (d)(2) apply by substituting "any shareholder^* of the S corporation" for "the taxpayer."
(3) If subsection (a) applies to a unit for the year, section 183 (about not-for-profit activities) doesn't also apply to it that year, but that year still counts toward the 5-year presumption rule in section 183(d).
(4) Nothing here blocks a travel-away-from-home deduction otherwise allowed under section 162(a)(2), except for the business of renting out dwelling units.

(g) Special rule for minimal rental use
If a taxpayer uses a unit as a residence during the year, and actually rents it out for fewer than 15 days that year, then no deduction is allowed because of that rental use, and the rental income isn't included in the taxpayer's gross income at all.