A few weeks ago, I met with a friend over coffee who had the idea to purchase a vacation home for his family to use and possibly to retire to someday.
In part one, we discussed how, of course, you should buy in an area you enjoy vacationing. It is also essential to make a plan, that not only includes a budget but your future intentions. Lastly, it is crucial to examine all the costs as well as the tax consequences, which we will discuss in part two.
Owning a vacation home is not straight-forward when it comes to taxes. It depends on how much you use the property and whether you rent it out.
You rent out the property for 14 days or less and use yourself the remainder of the time
You can rent out your vacation home without claiming the income provided it is not rented for more than 14 days within one year.
You can still deduct the loan interest and property taxes as a second home.
You rent out the property for more than 14 days and use it infrequently yourself
Your vacation home will be considered a rental property if you use the house less than 14 days per year or less than 10 percent of the number of days the home was rented.Read More