Tax Tips from Rent My Vacation Home
Tax Tips from Rent My Vacation Home® for 2012
New York, NY (PRWEB) April 02, 2012
Rent My Vacation Home® dot com informs that the IRS doesn’t rely on the notion of a cookie cutter vacation home when it comes to tax: it says that a second home can be a condo, co-op, mobile home, RV, house trailer – and even a boat if it has sleeping, cooking and toilet facilities.
Assuming that a vacation home and the IRS’s vision are similar enough, you can get a tax break or two on purchasing and owning a vacation home. For tax purposes, deduct “qualified residence interest” on a mortgage secured by a second home – that may also include points. But it has to meet the qualifications for a second home (generally, sleeping, cooking and toilet facilities) for purposes of the mortgage interest deduction: bare land does not count even occasionally plop a tent on it.
In addition to mortgage interest, real estate taxes paid on a vacation home are also generally deductible.
Deduct some of the costs related to upkeep of the property if renting out the property. Of course, that necessarily means to report rental income, as well, but the income and tax breaks together might (I said might) help pay for the property.
There are restrictions on tax breaks when using a vacation home as a residence and as a rental. A vacation home that you own 100% for personal use, does not actually have to stay in it during the year to deduct the interest and real estate taxes. Additionally, property that you use as a vacation home and you rent it fewer than 15 days during the tax year, does not have to include the rent received in the income may not deducted in the rental expenses. Allowed to take the deductions for the interest, taxes, and (if applicable) casualty and theft losses.
If, however, homeowner regularly rents the vacation home out, meaning that rent is out and no personally use the vacation home for at least 14 days or 10% of the number of days renting it out at a fair rental price (letting Aunt Margaret stay there on the cheap doesn’t count), cannot take the deduction for home mortgage interest on a Schedule A. Instead, report the income received and claim a pro-rated share of expenses for the property on a Schedule E. There are some restrictions and tricky rules with rentals – so be sure and check with your tax professional for more details.
Finally, keep in mind that, at sale of a vacation home, will likely be subject to capital gains tax. There’s an exception if converting the vacation home to a primary home in sufficient time before the sale.Again, check with a tax professional for the skinny before making any decision.
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