Excerpt from: Buying and Owning a Second Home
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| June 22, 2009 | | Making sure that you can take a tax deduction on your second home | Right now is a reasonably good time to buy a second home to use for your ski vacation property. You can also use it as a rental property, making some money by letting others use it (and charging them) when you are not using the property.
The good news is that you can use your ski vacation rental property to get tax deductions. However, there are some caveats. MainStreet.com describes some of the considerations if you want to take a tax deduction on your ski vacation rental property:
Interest and tax payments on a second home would be deductible on
your federal return. If you rent the property out, maintenance,
advertising and other outlays can be deducted as business expenses.
But to get all the business deductions, you have to limit your own
use of the property, generally to 14 days or less. It’s a complicated
matter, described in IRS Publication 527.
If you use the property yourself, for example, a loss caused by rental
expenses exceeding income cannot be used to offset other types of
income, such as profits in the stock market. As you can see, you would get a tax deduction for the interest and tax payments on your second home, regardless of how often you use it. If you want more deductions, you will have to treat them as business expenses, and that's when the restrictions really start piling on. It is a good idea to carefully consider your options before you commit to buying a ski vacation rental property. Understand what is really at stake, and make sure you know what will ultimately be deductible on your taxes.
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