As a certified public accountant with a real estate license, Erich Faber knows the ins and outs of owning a vacation home from two sides of the issue.

Faber, who has owned a CPA firm at the lake for more than 15 years, said there are three general categories in which vacation homes fall: those used exclusively by the homeowner, those rented for fewer than 15 days per year and those rented for more than 15 days annually.

"If it is purely a vacation home that you are not renting, the owner can deduct mortgage interest and real estate taxes," he said.

Federal tax laws permit homeowners to write off the interest and taxes as itemized deductions on one home in addition to the primary dwelling.

In the case of homes rented for fewer than 15 days annually, the Internal Revenue Service does not require homeowners to claim the rental income or rental expenses, but on homes rented more than 15 days per year the income and expenses must be reported.

"There is a limitation on the amount of expenses that can be claimed if a property is used for personal purposes for more than 14 days of the year," Faber said. "Basically the amount of expenses cannot exceed the income."

If personal use is fewer than 14 days per year then a rental loss can usually be claimed. In some cases, a homeowner cannot show a loss on a rental property. There is at least one exception listed in IRS Publication 527 Residential Rental Property.

Also, according to the publication, expenses must be divided between rental use and personal use.

"It is important to keep a good summary of all income and expenses," Faber said.

Expenses can include, but are not limited to, repairs, cleaning, advertising, insurance and depreciation.

There are many rental companies at the lake that will manage the rental of vacation homes for homeowners. At the end of the calendar year, some companies can provide homeowners with income and expense data.

Faber obtained his real estate license in 1985 when he was a student at Washington & Lee University in Lexington. He sold real estate at Smith Mountain Lake during the summer months to help pay for college.

"I've always kept my real estate license, and I like helping people make the best real estate decisions from a tax and financial standpoint," he said.

Faber, of Hardy, has been an agent at Prudential Waterfront Properties since 1993.

At the lake "a lot of rentals don't generate positive cash flow ... but tenants may cover costs," he said.

The greater gains generally occur when a property appreciates and sells. Thus, most homeowners who rent out vacation homes are not looking to make a huge profit from the rental income but to enjoy large capital gains at sale time, Faber said.

To download a copy of Publication 527, visit www.irs.gov.