Luxury Housing Trends & Home Improvement Ideas

It’s been a while since we mentioned vacation homes, and I came across an article that deals with how they are tax deductible and figured I’d share the details:

Assuming you finance your vacation home, the interest on the loan is tax deductible (so long as the mortgage isn’t greater than the home’s market value).

If you file an itemized return, its real estate taxes are deductible, too.

Thinking of renting your vacation home?

If you rent it 14 days or less a year, the rental income is tax-free. It gets more complicated if you rent it out more than 14 days a year. Then you have to compare the days rented to the days of personal use. “When the personal use of the home exceeds 14 days–or 10 percent of the total number of days rented, (whichever is greater), all rental income must be reported and deductions must be allocated between rental and personal days.” Yeah, my brain went a bit fuzzy at that, too. The article earnestly recommends seeing a tax professional if you’re planning to buy a vacation home with the primary intention of renting it out.

Source: “Tax Talk” in American Dream Homes Winter 2005