Are you a proud owner of a vacation home that you visit frequently? If yes, then you might be wondering if you can write off your vacation home on your taxes.
The answer is, it depends. Let’s dive into the details.
Primary Residence vs. Second Home
Primary Residence: This is the house where you live most of the time. It can be an apartment, a house, or even a houseboat! When you sell your primary residence, you can exclude up to $250,000 (or $500,000 if married filing jointly) of capital gains from your taxable income.
Second Home: A second home is a property that you own but do not live in as your primary residence. It could be a vacation home, rental property, or any other property that you own but don’t use as your primary residence.
Deducting Expenses for Your Second Home
If you own a second home that you use as a vacation home and rent it out when you’re not using it, then there are several expenses that you might be able to deduct on your taxes:
- Mortgage Interest: If you have a mortgage on your vacation home and itemize your deductions, then you can deduct the mortgage interest.
- Property Taxes: You can also deduct property taxes on your vacation home if you itemize your deductions.
- Rental Expenses: If you rent out your vacation home when you’re not using it, then you can deduct certain expenses related to renting it out such as advertising costs or property management fees.
Limits on Deductions
There are limits on how much you can deduct for mortgage interest and property taxes. You can only deduct mortgage interest on up to $750,000 of debt (or $375,000 if married filing separately) for mortgages taken out after December 15, 2017. You can only deduct up to $10,000 in property taxes for state and local taxes combined.
When Can You Not Deduct Expenses?
You cannot deduct expenses for your vacation home if:
- You do not rent it out at all.
- You rent it out but use it for personal purposes for more than 14 days or 10% of the total days rented (whichever is greater).
Final Thoughts
In conclusion, you might be able to write off your vacation home on your taxes if you use it as a rental property and follow the rules and limits set by the IRS. However, if you use it solely as a personal vacation home and do not rent it out at all, then you cannot deduct any expenses. As always, consult with a tax professional to make sure you’re following all the rules and maximizing your deductions.