Tax Breaks for Vacation Homes
Just like your main home, vacation or second homes can have considerable costs – mortgage payments, taxes, and so forth. Good news: Many of the same tax breaks you can get for your primary home are also available for a vacation home.
Mortgage Interest Deduction
If you’re paying a mortgage on a vacation home, you may qualify for the mortgage interest deduction. If you don’t rent out the home, you may claim the home as a qualified second home and take the deduction. If you do rent out your vacation home, you must use either the home more than 15 days a year or more than 10% of the number of days the home is rented in order to claim the deduction.
To be able to deduct mortgage interest, the total debt for both your main home and vacation home must not exceed $1,000,000 ($500,000 if married filing separately).
Real Estate Tax
You may also be able to deduct any real estate taxes assessed on your vacation home. If the taxes are included in mortgage payments, then your mortgage holder should send you Form 1098 with the amount of taxes paid.
Vacation Home as Rental
If you rent out your vacation home, you may have to claim any tenant’s payments as taxable income. It depends on how many days during the year you rented the home. Less than 15 days, and you don’t have to claim the rent as income; more than 15 days and you do. Any rental expenses are also deductible. See Renting Part or All of Your Home.
Just like with a main home, points paid for a mortgage on a vacation home are deductible. But unlike with your main home, you cannot deduct the points all at once – you can only deduct over the term of the loan.
Home Equity Loans
If you secure a home equity loan with a vacation home, you may be able to deduct interest paid on the loan. You may deduct the interest if the loan does not exceed $100,000 or $50,000, if married filing separately.