It's a great time to purchase or own a second home. Recently I was talking with CPA Angie Ledbetter from Guest, Shutte, Cosper and Ledbetter in Flagstaff, AZ about the tax benefits of owning and purhcasing a second home. Here were the points she shared with me:
Tax Benefits for owning a second home:
1. Mortgage Interest is fully deductible like it is on your primary residence, on the first $1.1MM of secured debt that you use to purchase or fix up your first home or second home combined.
2. Real estate tax is tax deductible
3. Qualified Mortgage Insurance Premiums is tax deductible
4. The Points (aka loan origination fees, loan discounts) that are paid on the purchase of your home are tax deductible
A qualified second home can be a house, a condo, a trailer, a mobile home, or a boat--as long as it has a kitchen, sleeping and bathroom facilities.
If you rent out your second home as a rental property for more than 14 days in a year, you do need to report your rental income on your tax return.
Some deductions are:
1. Mortgage Interest
2. Your Property Taxes
3. Advertising
4. Utilities
5. Repairs and Maintenance
But you need to make sure you allocate those expenses from the time you use the home personally and the time that you rented it out.
I'm not a CPA, so if you have further questions contact your CPA for answers that benefit your specific situation. Some of these may be specific to Arizona, so if you live in another state check with your CPA, too!
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