The Internal Revenue Service has issued regulations governing recently passed legislation that liberalized deductions for rented vacation homes and for the use of part of a home for business purposes.

The changes are retroactive, and consequently taxpayers have until April 15 to apply for refunds for taxes paid under the now-outdated tighter regulations for as far back as 1978, in most circumstances.

The key change in the rental of vacation homes allows the owner to rent to a relative and not only continue to deduct interest and taxes, but also to take depreciation, insurance and other costs as business deductions as long as the relative uses the home as the principal residence.

Under the old regulations, any use by the owner or relative for more than 14 days a year, or 10 percent of the total rental period, prevented the owner from taking business deductions.

The change is designed, for example, for someone who buys a home in Florida and rents it to his or her parents for 11 months and then uses it for a vacation home for two weeks. It must be the parent's principal residence and the rental must be at a fair market level.

In a less common situation, where two persons, A and B, buy a home for investment purposes, splitting the cost, for example, on a 50-50 basis, and one of the two, A, lives in the house, the IRS also issued liberalizing regulations.

In this situation, the person who does not live in the house, B, can treat the house as a business investment and take 50 percent of the depreciation, insurance costs and other expenses as deductions. A, however, can only take deductions for taxes and interest.

The regulations, which are based on legislation passed last year by Congress, also permit persons who run part-time businesses from their home to take certain business deductions in limited circumstances.

Someone working full time who also runs a real estate business at night in their home can deduct home office expenses if the section of the house used in the real estate operation is "used exclusively and regularly as the principal place of business.