Just like your main home, vacation or second homes can have considerable costs – mortgage payments, taxes, and so forth. Good news: Many of the same tax breaks you can get for your primary home are also available for a vacation home.
If you’re paying a mortgage on a vacation home, you may qualify for the mortgage interest deduction. If you don’t rent out the home, you may claim the home as a qualified second home and take the deduction. If you do rent out your vacation home, you must use either the home more than 15 days a year or more than 10% of the number of days the home is rented in order to claim the deduction.
Note: Beginning with 2018 returns, there are now different maximum loan amounts rules, depending on the loan date:
You may also be able to deduct any real estate taxes assessed on your vacation home. If the taxes are included in mortgage payments, then your mortgage holder should send you Form 1098 with the amount of taxes paid.
Note: Real estate tax is still deductible, but beginning with 2018 returns, the total of all state and local taxes is limited to $10,000 ($5,000 if married filing separately. Included in this total are state and local income taxes, real property taxes, and personal property taxes.
If you do rent out your vacation home, you must use either the home more than 14 days a year or more than 10% of the number of days the home is rented in order to claim the deduction—but additional rules may apply. Any rental expenses are also deductible. See Renting Part or All of Your Home.
Just like with a main home, points paid for a mortgage on a vacation home are deductible. But unlike with your main home, you cannot deduct the points all at once – you can only deduct over the term of the loan.
If you secure a home equity loan with a vacation home, you may be able to deduct interest paid on the loan. You may deduct the interest if the loan does not exceed $100,000 or $50,000, if married filing separately.
Note: Beginning with 2018 returns, borrowing against your home for any other purpose, such as repaying credit card and various other debts, is no longer deductible.