Learn About Tax Advantages of Buying a Second Home and You Garner the Benefits

Author: marco

Author: marco

There are several tax breaks that you can take advantage of if you own a second home, one of them being property taxes. You can deduct property taxes paid on whatever number of homes you own, which is unlike the mortgage interest rule. Mortgage interest deductions vary according to the use of the property. If you rent out the second home to help with your bills, but you only rent for 14 days or less, then you can keep the money without paying taxes. Your second residence may be in a hot vacation spot and you might get 10 thousand dollars or more during the two weeks you rent it, but the IRS considers your home a personal residence. Therefore, you can deduct the mortgage interest and property taxes like you do on your main residence. If you exceed the 14 day limit, you have to report the rental income, but you can deduct rental expenses. Do not get confused here because you have to figure out what the costs are when the property is being used for personal reasons and when it is being rented out. If you use the property for 14 days or 10% or more of the time that it is rented out, then it is considered a residence by the IRS and you cannot deduct losses. If you have met certain conditions such as filing Form 1040 A and itemizing deductions on Schedule A, being legally liable for the loan, there being a true creditor-debtor relationship with your lender and the mortgage being a secured debt against a qualified home on which you have ownership, then you can deduct home mortgage interest on your second home, according to applicable tax rules, some of which are explained above. You cannot deduct mortgage interest that you are paying for someone else, unless you are legally liable for the mortgage loan. There must be an intent between both parties for the loan to be repaid by the debtor. You can treat a new home as a second home the moment you buy it. Should you decide to treat your second home as your man home, then what used to be your main home may be treated as a second home the moment you stop using it as your main place of residence. If you already have a second home or if you are planning on buying a second home, then the best thing you can do is talk to a tax professional. You can do the research yourself, but the tax code is quite long and wordy, and it is often very confusing. Your tax professional should have expert knowledge of the tax code. You cannot expect him/her to have memorized the tax code because they can always refer to the code itself to give you expert advice. If you have not already bought a second home, you may want to consult with a tax professional before you do so in order to fully understand the tax implications. Once you fully understand the tax implications, you will be better able to make a decision of the type of property you want to buy and its use.About the Author:

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