The Tax Difference In Second Homes

Dated: 06/11/2018

Views: 59

Image title

A principal residence and a second home have some similar benefits, but they have some key tax differences. A principal residence is the primary home where you live and a second home is used mainly for personal enjoyment while limiting possible rental activity to a maximum of 14 days per year.

Property taxes on first and second homes are deductible but limited to a combined maximum of $10,000 together with other state and local taxes paid.Under the 2017 Tax Cuts and Jobs Act, the Mortgage Interest Deduction allows a taxpayer to deduct the qualified interest on a principal residence and a second home. The interest is reduced from a maximum of $1,000,000 combined acquisition debt to a maximum of $750,000 combined acquisition debt for both the first and second homes.

The gain on a principal residence retained the exclusion of $250,000/$500,000 for single/married taxpayers meeting the requirements. Unchanged by the new tax law, the gains on second homes must be recognized when sold or disposed.

Tax-deferred exchanges are not allowed for property used for personal purposes such as second homes. Gain on second homes owned for more than 12 months is taxed at the lower long-term capital gains rate.

This article is intended for informational purposes. Advice from a tax professional for your specific situation should be obtained prior to making a decision that can have tax implications.

Blog author image

Mary Ann Lightfoot

Originally from Chicago, IL. I started in Real Estate in 2000 selling new homes for an Age Restricted 55+ Community and became a licensed Full-Time General Realtor in 2005. I’ve been representing ....

Latest Blog Posts

Hurray Wynn Resorts Will Let Your Park For FREE If You Spend 50 Dollars

When the Las Vegas casino companies insisted on locals paying for parking, I was furious. As if I don't spend enough in their gaming and entertainment establishments!Finally, someone understands the

Read More

Waiting Will Cost More

An economist responded when asked how interest rates would change: “They may fall some and then, rise and after that, they’ll fluctuate.”Just because interest rates have been low for ten years

Read More

Grrr The Fed Just Made It More Expensive To Buy A Home

Yesterday the Federal Reservehiked the benchmark interest rate a quarter of a point, from 1.75 percent to 2 percent. Interest rates are the highest they have been in 10 years!Buyer who need a

Read More

The Tax Difference In Second Homes

A principal residence and a second home have some similar benefits, but they have some key tax differences. A principal residence is the primary home where you live and a second home is used mainly

Read More