Q-My wife and I are looking into buying a second vacation home in Palm Springs. I know the rules have changed over the years, but can I still deduct my mortgage interest on that home?

A-You probably can. Here's the way it works. The second home must be a "qualified residence," which means it must have a permanent toilet, kitchen and sleeping facilities. I'm going to assume your home will qualify, but for folks looking to buy an RV or a boat as a "second home," things could be different. Under current law you can take the mortgage interest deduction on your primary residence and ONE other residence. So your second home in Palm Springs should be fine. But if you also decide to buy a cabin in Mammoth in a couple of years you will have to choose which of the two you want to designate as your "second home" for tax purposes. Obviously the one with the higher mortgage interest payment would make the most sense.

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