| Before discussing the tax benefits of a second | | | | If you are able to rent the property for more |
| home, let us first define what it is. A second | | | | than 2 weeks, you will have to report the income |
| home is usually termed a vacation home. These | | | | earned. In addition, you can also benefit from the |
| are properties used by owners during holidays. | | | | different allowable deductions. But you have to |
| Most homeowners can earn additional income | | | | take note that the IRS will not allow your |
| from this as they can have it rented. Many people | | | | expenses to exceed your income. Some of the |
| are now discovering that they can save more if | | | | allowable deductions include the depreciation, |
| they rent single family homes rather than stay in | | | | maintenance, mortgage insurance, mortgage |
| hotels when vacationing. | | | | interest, real estate taxes and more. However, if |
| However, you have to keep in mind that the | | | | this will create a rental loss, other deductible |
| Internal Revenue Services (IRS) will categorize | | | | expenses will no longer be deducted. |
| your property as residence if you use it | | | | Deciding to sell the second home |
| personally for a certain period in a year. However, | | | | If you are going to sell the house, you have to |
| if you will have the property rented year round, it | | | | report the capital gain or loss. Its basis will |
| will be considered as an investment property. You | | | | consider the amount of depreciation you have |
| should also take note that in order for a property | | | | indicated for previous claims. Since the rates for |
| to be deemed as a second home it has to have a | | | | the capital gains have been constantly changing, |
| kitchen, bathroom and a place to sleep. | | | | you have to consult a professional about this. You |
| Having a second home is becoming more | | | | may also consult your adviser if you have moved |
| attractive because of its tax benefits. However, it | | | | to live in your vacation property after selling your |
| can be confusing. Having a second home has | | | | primary place of dwelling. |
| different tax advantages but you have to check | | | | There are different tax benefits in purchasing a |
| with your accountant or similar advisers because | | | | vacation property. However, you have to be |
| tax regulations change from time to time. | | | | careful in understanding the terms if you really |
| Tax break | | | | want to take advantage of those. Keep these |
| If you rent your property for fourteen days or | | | | rules in mind when considering purchasing a |
| less, you will have a tax break because you do | | | | second property. One is that your expenses shall |
| not have to report the earnings you generated | | | | be deductible from the rent if you do not use the |
| from this. In addition to that, you will still be able | | | | property. If you will rent it for less than 14 day |
| to deduct the mortgage interest rates as well as | | | | per year, you do not have to report the income |
| the real estate taxes. | | | | generated in your tax return. Moreover, if you |
| Renting your vacation home for more than 14 | | | | use it for more than 14 days, the expenses shall |
| days | | | | be prorated to your income. |