Final answer:
The depreciation expense of a vacation home for rental use is calculated as the ratio of rental days to total days of use (rental plus personal days), ensuring the expense reflects the income-earning use of the property.
Step-by-step explanation:
When allocating expenses of a vacation home between personal use and rental use, the correct method to determine the amount of depreciation expense allocated to the rental use is indeed to calculate the ratio of rental days to the total days of use (which is the sum of rental days plus personal use days). This approach ensures that the depreciation expense reflects the proportion of the property's use that is actually generating rental income.
To clarify with an example: If a vacation home is used for 120 days in a year, with 80 days used for rental and 40 for personal use, the depreciation allocated to rental use would be calculated as 80/(80+40), which equals 2/3 or around 66.67%. Consequently, two thirds of the home's annual depreciation would be deductible as a rental expense.