A vacation home can provide you and your family with lots of good times. If you own a vacation home it could also provide you with many tax benefits to make your ownership less costly and more enjoyable. Here are some surprising tax advantages to home ownership you should not overlook.
Home and Vacation Home
Many people do not fully use their vacation home as much as they could and as time passes they might even use it less. Even with less personal use you still have to pay your mortgage, real estate taxes, insurance and maintenance costs.
Obtain tax-free income from your home or vacation home. If you own and rent out your home or second home for 14 days or less a year, the rental income paid to you is not taxable. You are not even required to report it to the IRS on your tax return. Planning note: If your home or vacation home is located in a vacation area or where special events draw high numbers of visitors at certain times of the year, • you can rent it out tax-free for up to fourteen days and use the money toward your ownership costs or to pay some of your own travel costs.
Deduct your mortgage interest on your home or vacation home. The mortgage interest deduction is a great tax benefit that can make your ownership less costly. In general, you can deduct up to $1 million ($500,000 if you are married filing separately) on the interest of mortgage borrowing used to acquire your primary residence. This same limit applies whether you have one home or two. Loophole: Your second home may be a boat or a recreational vehicle.