GMAC Real Estate Stay Aware of the Tax Rules with Vacation Second Homes
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Stay Aware of the Tax Rules with Vacation Second Homes

Takeaways

  • If your property is an investment second home you are limited as to how much you can use the property.
  • Rental income for 15 days or fewer in a year is completely tax-free for personal use second homes.
  • Look into the tax implications when deciding how to use and designate your vacation second home.

Did you know?

  • 65% of vacation home owners say the property has been a better investment than stocks.
Vacation home usage defines your tax status. Your vacation second home may be your personal getaway and never rented so you can head to your second home anytime you like. A vacation home can also be an investment property that is regularly rented out to help pay for the property. Maybe your vacation second home is rented out only rarely. How you use your second home has tax implications.

If your vacation second home has been designated as investment real estate, you can only use your property for the greater of either 14 days or 10% of the days rented. Investment second homes provide three main benefits. Your renters are helping you pay for the second home, if the community sees appreciation in property values you can sell the home and realize a gain, and second homes designated as investment property provide a number of tax deductions including depreciation on the house. Do keep in mind depreciation is limited to the percentage of time the house is rented as compared to your personal use time.

Where things get interesting in terms of taxing second home rentals is if you rent your house out for 15 days a year or less, that income is completely tax free. Just don’t claim any typical rental deductions such as depreciation or maintenance. Tax-free, short term rental income can come in handy if your vacation second home is on a golf course sponsoring a tournament, or in an area with a special event where people need temporary housing.

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.