GMAC Real Estate Short Term Rental can be Tax-Free Income
GMAC Real Estate

Articles & Resources

Specialty Real Estate

Real Estate Calculators

Room Planner

Short Term Rental can be Tax-Free Income

Takeaways

  • Investment real estate comes with many tax benefits, but the income is taxable.
  • A second home rented 15 days or fewer in a year don’t offer those benefits, but that income is tax-free cash in your pocket.
  • The tax status of your second home, whether personal residence or investment property, should be carefully considered to maximize all benefits.

Did you know?

  • A record 1.07 million vacation second homes were sold in 2005.
Renting your resort property short-term can be tax-free earnings. Many people buy vacation second homes with the intention of using them part of the year, then renting the home out as much as possible to earn income. Vacation second home owners who ensure their home falls into the tax category of investment property, that is a home used by the owner 14 days or 10% of days rented in a year, garner some tax benefits.

Investment second home owners can depreciate the house and deduct operating expenses, property tax and mortgage interest. At the same time any rental income earned by investment second home owners is taxable.

No Expense Deductions, But No Taxes Either

If you have no interest in turning your vacation second home into an investment property, it still is worth your while to consider renting the house 15 days a year or less. As far as the IRS is concerned your home is solely a personal residence. You might not be able to realize all the deductions available to a second home investment property, but the bonus is your rental income is completely tax-free money in your pocket.

Search for Second Homes for Sale

To search for a selection of second homes for sale, please visit lifestylehomesearch.com, or visit the website of a GMAC Real Estate Office that serves the area where you'd like to buy a second home. To learn more about buying Second Homes or Vacation Homes, explore the rest of this section, or contact a GMAC Real Estate Agent.