Second Home Tax Deduction Tips

November 3, 2015

Real Estate

Second Home Tax Deduction Tips

With the end of the year nearing, it’s time to get all your tax options in order. With a second home, you have tax items to consider that you wouldn’t normally have with a first home.
Second home tax deductions:

1. Mortgage interest. You can deduct the interest if you itemize deductions. Your deduction might be limited if either of these is true:

a) Your mortgage is more than the fair market value (FMV) of your home.
b) The mortgages on your main home and your second home are more than:

i) $500,000 if filing single
ii) $1 million if married filing jointly

2. Real Estate taxes. Interest on a home equity loan or line of credit. This applies unless either of these is true:

a) The mortgage is more than the Fair Market Value of the home. This is without mortgages and including grandfathered debt.
b) The home-equity debt on your main home and second home is more than:

i) $50,000 if filing single
ii) $100,000 if married filing jointly

3. Renting your second home

a) You don’t have to report rental income if both of these apply:

i) You use the home as a residence.

ii) You rent it for fewer than 15 days during the year.
iii) It’s considered a residence if you or a family member uses the home for personal use for more than the greater of these:

(a) 14 days
(b) 10% of the number of days you rent the home at fair rental value

You can’t deduct expenses you can attribute to the rental. However, you can deduct interest and taxes if you itemize your deductions.

If you use the home as a residence and rent it for 15 days or more, report the rental income. You can deduct your interest and taxes as described above. You can deduct other rental expenses, including depreciation. However, you can only deduct up to the amount of the income minus the deductions for interest and taxes. Carry over any rental expenses not deductible under this rule to the next year. Then, they’ll again be subject to this limit.

If you don’t use the home as a residence, the above rules don’t apply. Report your income and expenses the same as you do for other rental property.  Source: H&R Block

Stay tuned for more tax rules next week.

Contact Sonja Bush for help buying selling or renting your second home. She can be reached by phone at (661) 979-9000 or by email at [email protected]

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