If you own one or more vacation homes and are wondering how many you can deduct on your taxes, you’re not alone. While owning a vacation home can be a great investment, it’s important to understand the tax implications.
What is a Vacation Home?
A vacation home is a property that is used for personal enjoyment and is not rented out for more than 14 days during the year. It can be a house, apartment, condominium, mobile home, boat or similar property.
Deducting Mortgage Interest on Vacation Homes
If you have a mortgage on your vacation home(s), you can deduct the mortgage interest just like you can on your primary residence. However, there are limits to how much mortgage interest you can deduct.
You can only deduct the interest on up to $750,000 of mortgage debt if you purchased your vacation home after December 15, 2017. If you purchased your vacation home before December 15, 2017, you can still deduct the interest on up to $1 million of mortgage debt.
Deducting Property Taxes on Vacation Homes
Just like with your primary residence, you can also deduct property taxes paid on your vacation home(s). However, similar to mortgage interest deductions, there are also limits to how much property taxes you can deduct.
You can only deduct up to $10,000 of combined state and local income and property taxes per year. If the amount of property taxes paid on your vacation home(s) exceeds this limit along with any other state and local income taxes paid, the excess cannot be deducted.
Rental Income from Vacation Homes
If you rent out your vacation home for more than 14 days during the year, it becomes an investment property instead of a personal residence. This means that any rental income received must be reported on your tax return as rental income.
However, along with rental income comes deductible expenses such as property taxes, mortgage interest, insurance premiums, repairs and maintenance costs, and depreciation. These expenses can be used to offset the rental income received.
How Many Vacation Homes Can You Deduct?
Now that we’ve covered the basics of what you can deduct on your vacation home(s), let’s answer the question – how many vacation homes can you deduct?
The answer is that there is no limit to how many vacation homes you can own or deduct mortgage interest and property taxes on. However, keep in mind that the limits mentioned earlier still apply.
If you rent out any of your vacation homes for more than 14 days during the year, they become investment properties and must be reported accordingly.
Conclusion
Owning one or more vacation homes can come with tax benefits if you understand how to properly deduct mortgage interest and property taxes. Remember to keep track of any rental income received if you decide to rent out your vacation home(s) and report it on your tax return.
As always, it’s best to consult with a tax professional who can provide personalized advice based on your specific situation.