A home is the most valuable asset that many people ever own, so it's natural to look for ways to make it pay off for you. Renting out your home, either through brief short-term rentals or for an extended period of time, can turn it into an income-generating asset for you. However, there are complicated tax rules that homeowners who rent out their homes need to understand. The three rules below are among the most important to know before you put your home up for rent.

Rule 1: 14 days is a major milestone

The tax implications of renting out your home change dramatically if you decide to do so for longer than 14 days each year. If you only rent out your home for 14 days or less, then the IRS largely treats the enterprise as a nontaxable hobby. You don't have to pay tax on the rent you collect, and you can still claim popular tax breaks like mortgage interest deductions and real estate tax deductions in the same way you could if you weren't offering your home to renters. You're not allowed to claim rental-related deductions, but that's often a small price to pay for tax-free income.

Once you hit that 15th day, however, everything changes. Rental income is taxable, and although you can deduct the costs associated with renting, you'll still often end up with taxable income -- and you're certain to have a much bigger tax preparation mess on your hands.

House, calculator, money, and keys.

Image source: Getty Images.

Rule 2: Get all the deductions you can

In order to avoid paying a lot of income tax on your rental proceeds, you'll want to claim every deduction you legitimately can. Ordinary and necessary expenses for managing, conserving, and maintaining the property are all fair game, including loan interest, taxes, maintenance, utilities, and insurance. If you buy materials or supplies in order to do repairs and maintenance work, then those costs are deductible to the extent that they allow you to keep your property in good operating condition.

You can also claim a deduction for depreciation. Although the land on which your home sits isn't depreciable, the buildings are, and you can claim a portion of the value as a depreciation deduction against rental income each year. Depreciation is often overlooked among those renting for the first time, but it can be a sizable amount and offset substantial portions of the rent you collect.

Note, however, that not all expenses are deductible. If you spend money improving your home, that expense isn't eligible for a deduction. Restoration work or adapting the home to a new use can qualify as nondeductible improvements in the eyes of the IRS. So be sure to talk to an accountant if you aren't sure whether a given expense counts as maintenance or an improvement, because it makes a difference to whether you can claim a deduction.

Rule 3: Watch out when you sell

Tax-free income and plentiful deductions are upsides to renting out your home, but there's a trade-off. When it comes time to sell your home, you have to be careful or else you can lose some valuable tax benefits from homeownership.

For instance, one key tax benefit from homeownership is the capital gains exclusion on profits from the sale of your home, up to $250,000 for individuals or $500,000 for joint filers. To qualify, the home has to be your principal residence, which means that you must have lived in the home for at least two of the previous five years. If you fail to qualify, then you'll owe capital gains on your profit -- even if the home actually rose in value while you were still living in it full-time.

In addition, if you claimed depreciation tax breaks on the rental, the IRS will want those breaks back when you sell. Depreciation recapture imposes tax at higher tax rates in order to make up for the deductions you claimed while you were renting out the property.

Renting out your home can be more complicated from a tax perspective than you'd think. However, for those who have the opportunity to rent out their homes on either a short- or long-term basis, the financial benefits often make the tax headache worth the effort.