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Tax Advantages of Second Homes

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By : Vicki Hat    99 or more times read
Are you planning to buy a second home? Well, you will not only have an additional place for vacation or for your guests but it will also give you certain tax advantages.

Any homeowner of second homes has a chance to lower taxes. How do you do this? Check out the following:

  • Any mortgage interest can be considered a deductible on any qualified home (first or second house). The mortgage interest can actually be written off for only if the secured debt amounts to 1.1 million.

    There are some special rules that must be taken into consideration before a mortgage interest can be declared as a tax deductible. Certain conditions should also be met. For one, you should be liable for the loan. One must also declare the payment of as part of the schedule A of the form 1040. The debt owed should also be secured by a qualified home.

    However there are limitations as to the amount of mortgage interest to be deducted. A special rules need to be followed for home acquisition debt, home equity debt and grandfathered debt.

  • If the property is used for rental, you can keep your income without declaring it to the IRS if it was rented out less than 14 days throughout the year. It does not even matter how much you earn, the IRS do not care about it just as long as the number of days do not exceed to 14.

  • If the property has been rented out for the more than 14 days, any income gained shall be reported to the IRS for tax purposes. Any expenses incurred like maintenance, property taxes, insurance, utilities and other operating expenses can be used as a deductible. However, the amount paid shall be prorated according to your use (personal and business). This goes the same for your depreciation expense.

  • If personal use of home is more than 14 days or equates to 10% of the days that it was rented to other people out of fear rental price, the expenses that to be considered as an allowable deduction will include mortgage interest taxes and losses from casualty and theft. If this goes the same for depreciation expense.

  • If you plan to sell your second home that you have used as a primary residence continuously for several years after you have sold your first home, you may be able to claim up to $500,000 capital gains exclusion.

  • If losses are incurred from the Rental Property, make the total $25,000 of losses can be claimed against a rental income. The losses claimed lists only diminish as the amount goes beyond $100,000 in reaches the cap $150,000.

Do not just think that tax advantages are limited to the first time buyers. You as the owner of a second home will be able to enjoy different applications tax so that you can maximize profits or even reduce your tax payables. However bear in mind, that there is no such thing as negative tax or tax loss. If it happened that your deductibles exceeds your income, you won't be getting tax credits and the IRS won't have to pay back anything to you.
Learn more real estate tips when you visit the sites Phoenix Condos for Sale, Golf Real Estate in Phoenix and Phoenix Luxury Real Estate.

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