Deductions for real estate taxes and mortgage interest may be split between the portion of interest and taxes allocable to the rental of your vacation home and the portion allocable to your personal use. The portion allocable to rental is deducted in figuring your rental deductions, and the portion allocable to personal use is deducted as an itemized deduction on Schedule A.
The parents reduced their taxable income by $1,000 by splitting their home interest and taxes between personal use and the rental use of a vacation home. Since the parents income was taxed at the 30% tax bracket, the income reduction may decrease their income taxes by $300 ($1,000 x 30%).
If you are in a combined (federal, self-employment, and state) tax bracket of 30%, you could reduce your taxes up to $300 for every $1,000 of income reduction by splitting your home interest and taxes between personal use and the rental of your vacation home.