Do you own a vacation home in the Lynnwood area? As with any other property you own, you have to pay taxes on it. Fortunately, the IRS may vacation home tax deductions, depending on how you use the secondary dwelling. Our real estate agents know the best practices for keeping taxes to a minimum.
Vacation Home Tax Deductions—Best Practices
You can reduce mortgage interest and real estate tax on a vacation home, just as you can for your primary residence. How are you using the vacation home? If you rent out the home, as most people do, then limit the rental days to no more than 14 days. This allows you to pocket the full rental income without having to pay rental income tax. This holds regardless of how much you’re charging the tenant.
The IRS may also classify your home as “dual-use” property if you use the home yourself AND rent it out. However, the home is considered rental property if the total number of personal use days does not exceed 14 days, or one day for every 10 days of rental —whichever is greater.
Keeping the home as a rental property means you qualify for 100% of deductions as a rental home. Otherwise, you only receive a percentage of the deduction benefits proportional to the days you use the home for personal use. In other words, if you live in the home for 30 days and rent it for 70 days, then you only qualify for 70% of rental deductions.
Property Tax Is Complex
What we mentioned barely scratches the surface. Due to the immense complexity involed with taxes on secondary real estate, we suggest you hire an estate planner. Our firm can advise you on the best plan to maximize deductions. Curtis and Casteel Law Group has many years of experience helping property owners maximize tax deductions on vacation homes.
Edited by Justin Vorhees
Property Consultation for Secondary Homes
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