Tax Tips For Your Vacation Home or Second Residence

Paula Rogers, CPA, President and Partner at Terry Lockridge & Dunn provides tax deductible information on this type of real estate, as well as tips for reducing the amount of taxable gain upon sale of your vacation home or second residence.
often I get the questions from clients hey I'm thinking about buying a vacation home or second residence in Florida or cabin in Minnesota what are some things I can deduct if I do this or what are some tax you know things I need to be aware of and I will tell them you can deduct mortgage on two residences your principal and the second house the IRS will let you allow will allow you to deduct interest on two homes but not more than that and the mortgage interest you can deduct is on debt up to a maximum of 1.1 million also you can deduct property taxes on an unlimited amount of property so they could have three homes yeah you only can deduct interest on two but you can deduct property taxes on as many as you want another text benefit you get on a second home used as a personal residence although not your principal residence is the energy-efficient residential credits which is your solo credits or credits for putting in a geothermal credit you can get up to a 30% credit if these are installed before year 2017 one thing to remember on vacation homes or second residences is that any gains when you sell this property will be taxable if you have losses they are not deductible but gains are taxable you can reduce any gains you may have on the sale of a vacation home or second residence by converting at first to your principal residence so let's say you're living and I while you retire sell your home here and qualify for the home exclusion because you've lived here in Iowa for two out of five years in that residence as your principal residence and now you go move permanently as a principal residence to your home in Florida your cabin minnesota and as long as you live there for two out of the last five years before you sell that residence you will be eligible for some of the gain exclusion you will not that some of that may be limited due to years of non qualified use which is when it wasn't your principal residence but that's a calculation that we would be happy to assist you with and make sure you maximize your tax savings and any gains on the sale of second home or a vacation home feel free to contact us at Terry Lockridge and done regarding your vacation home or second residence and any tax ramifications you may have concerning these find real solutions for your tax planning at terry Lockridge and done or online at real financial strategies calm

One thought on “Tax Tips For Your Vacation Home or Second Residence”

  1. What happens when you sell a second (investment) property for $40k more than you bought it for but you want to reinvest the equity and profit in another property [that would be your new second/vacation home]?

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