The Tax Difference in Second Homes

By
Real Estate Broker/Owner with Metro Brokers/Morningside Homes, LLC DRE# ER300941

 

A principal residence and a second home have some similar benefits, but they have some key tax differences. A principal residence is the primary home where you live and a second home is used mainly for personal enjoyment while limiting possible rental activity to a maximum of 14 days per year.10213246-250.jpg

Under the 2017 Tax Cuts and Jobs Act, the Mortgage Interest Deduction allows a taxpayer to deduct the qualified interest on a principal residence and a second home. The interest is reduced from a maximum of $1,000,000 combined acquisition debt to a maximum of $750,000 combined acquisition debt for both the first and second homes.

Property taxes on first and second homes are deductible but limited to a combined maximum of $10,000 together with other state and local taxes paid.

The gain on a principal residence retained the exclusion of $250,000/$500,000 for single/married taxpayers meeting the requirements. Unchanged by the new tax law, the gains on second homes must be recognized when sold or disposed.

Tax-deferred exchanges are not allowed for property used for personal purposes such as second homes. Gain on second homes owned for more than 12 months is taxed at the lower long-term capital gains rate.

This article is intended for informational purposes. Advice from a tax professional for your specific situation should be obtained prior to making a decision that can have tax implications.

 

Posted by

Buy or Sell with Patty Clark              Denver/Aurora Co. and surrounding areas 

Chris and Patty

 If you would like to be sent properties on a daily or  weekly  basis just call or email me and let me know your wants and  needs. A match will be made with a home you love and with  monthly payments you can afford. I specialize in first time  home buyers and sellers who are ready to make a move.


patty@morningsidehomes.com

www.morningsidehomes.com
Cell: 720-231-5200                       CRS,GRI,WCR,SFR,CNE, MRE

 

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Re-Blogged 1 time:

Re-Blogged By Re-Blogged At
Topic:
Home Buying
Tags:
interest rate
capitol gains
mortgage interest deduction
tax professional

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Ambassador
1,830,059
Michelle Carr-Crowe Just Call 408-252-8900 Top 1%!
Get Results Team...Just Call (408) 252-8900! . DRE #00901962 . Licensed to Sell since 1985 . Altas Realty - San Jose, CA
Family Helping Families Buy & Sell Homes 40+ Years

It is so important for home buyers to fully comprehend the ownership and tax differences between owner-occupied principal residence, vacation home, second home and investment property.

Jun 22, 2018 07:05 PM #1
Rainmaker
450,820
Patty Clark
Metro Brokers/Morningside Homes, LLC - Denver, CO
Helping Families Make the Right Move

Yes and the rules for renting out your 2nd home for part of the year.  It's complicated so hopefully clients will talk to their CPA before proceeding with the purchase.

Jun 22, 2018 08:13 PM #2
Ambassador
2,800,507
Debe Maxwell, CRS
www.iCharlotteHomes.com | The Maxwell House Group | RE/MAX Executive | (704) 491-3310 - Charlotte, NC
Charlotte Homes for Sale - Charlotte Neighborhoods

Hi Patty! Michelle re-blogged this and I'm glad she did - I missed a great post!

I had no idea that a second home could not be rented more than 14 days in a year. We don't sell many second homes in the Charlotte area and when we do, they are used 6 months out of the year and vacant the other 6 months! Great information to know though!

Jun 22, 2018 09:53 PM #3
Rainer
64,517
Golden1 Agents
San Mateo, CA

Great information!

Jun 24, 2018 04:36 AM #4
Rainmaker
450,820
Patty Clark
Metro Brokers/Morningside Homes, LLC - Denver, CO
Helping Families Make the Right Move

Thank you for reading my post.

Jun 28, 2018 02:03 PM #5
Rainmaker
1,652,172
Lottie Kendall
Compass - San Francisco, CA
Serving San Francisco and the Silicon Valley

Hi Patty -- you shared some great information here. Unfortunately for those of us living in high cost areas like mine, the $10,000 cap is a huge blow - that hurts even first time buyers of many simple 2BR/2BA condos. Oh well!

Jun 28, 2018 06:41 PM #6
Rainmaker
362,971
Jill Watts
Realty Pro, Inc. - Vancouver, WA
A Luxury Experience at Every Price Point!

WOW. Thanks for the information. We've dreamed of a second home in a sunny clime.  We will be careful before buying one.  14 days is prettyshort. 

Jun 28, 2018 09:30 PM #7
Rainmaker
175,557
Foster Smith Summerville
Carolina One Real Estate - Summerville, SC
Summerville & Charleston Homes for Sale SC Realtor

Great info and article. Most people are not aware of the 14 days.

Jun 29, 2018 04:46 AM #8
Ambassador
3,718,285
Jeff Dowler, CRS
Solutions Real Estate - Carlsbad, CA
The Southern California Relocation Dude

Hi Patty

Congratulations on the feature! This is such an important topic for those considering a second home since taxes area little different, along with the changes in the tax laws themselves. It's best to consult your CPA so you understand the tax implications of buying a second home, especially if you are thinking of renting it when you are not using it! I have had several second home buyers in that situation.

Have a great weekend!

Jeff

Jun 29, 2018 08:20 AM #9
Rainmaker
355,632
Marney Kirk
Cummings & Co. Realtors - Towson, MD
Towson, Maryland Real Estate

Patty this is such a great article. It really lays out the differences, and what could be a tax implication for a second home.

Jun 30, 2018 06:20 AM #10
Rainmaker
450,820
Patty Clark
Metro Brokers/Morningside Homes, LLC - Denver, CO
Helping Families Make the Right Move

Thank you. I does make it very clear if a second home intends to be a rental at some point.

Jun 30, 2018 09:55 AM #11
Rainmaker
362,377
John Wiley
Right Move Real Estate Group- EXP Realty - Fort Myers, FL
Lee County, FL Real Estate GRI, SRES,GREEN,PSA

Patty, this is good information we can share.

Here in Florida, we see a lot of second home buying. I don't think that all the buyers take the tax implications into account.

Thanks

Jun 30, 2018 04:11 PM #12
Rainmaker
1,397,171
Georgie Hunter R(S) 58089
Hawai'i Life Real Estate Brokers - Haiku, HI
Maui Real Estate sales and lifestyle info

Those are some good basic things to know beforehand when purchasing or selling a second home.

Jul 01, 2018 12:13 AM #13
Rainmaker
926,147
Jan Green
Value Added Service, 602-620-2699 - Scottsdale, AZ
HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN

Great post for your clients.  Knowing the benefits and rules of owning a second home is something I run across frequently in Scottsdale.  Happy 4th!

Jul 04, 2018 11:17 AM #14
Rainmaker
450,820
Patty Clark
Metro Brokers/Morningside Homes, LLC - Denver, CO
Helping Families Make the Right Move

Arizona does seem like a good place to have a 2nd home. Once the snow starts here in Denver many people migrate to a warmer climate.

Jul 06, 2018 08:19 AM #15
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