There are so many benefits to owning a second home including a long-term place to relax and create memories. But, do you know about the financial benefits of tax breaks that can come from owning a second home? Before making a decision to purchase a second residence, talk with your financial or tax adviser to make sure you're taking advantage of all available financial benefits.
We've compiled a quick list of some of the more common financial benefits of owning a second home.
1. Mortgage Interest. The same rules that apply to deducting the mortgage interest on your first home apply to your second home.
2. Renting Out Your Home. If you rent your home out for 14 days or fewer during the year, your rental income is tax free. As a bonus, the IRS doesn't care what you charge as long as the property is rented for less than 2 weeks.
3. Deduct Property Taxes. Property taxes are based on the assessed value of the home and can be deducted at tax-time. The amount that can be deducted will depend on your income level and overall tax situation.
4. Home Improvements and Repairs. If you buy a fixer-upper and will be undertaking major renovations, you can deduct the interest of a hoe equity line of credit or loan. Before taking a loan or line of credit, plan for tax time with your tax adviser to see what option will be best for you.