Considering An Oceanfront Vacation Home? What You Need To Know About Tax Benefits
Are you buying an oceanfront vacation home for personal enjoyment, and also looking to rent it out when you're not using it? If so, renting is a great way to help pay for the cost of your second home. You may not be aware of the tax benefits that come with owning two homes, which includes the potential for some limited tax-free rental income. Here is what you need to know about your vacation home and taxes.
Know About The Tax Deductions
If your new oceanfront property is going to be your second home, know that you are able to deduct the interest on the mortgage. The only catch is that you must not have two mortgages that together total over $1.1 million. This is typically not a problem for most homeowners. You are also able to deduct your property taxes for both homes. The only thing that will vary is how much income you can deduct due to rental income, which depends on how you rent out your property.
Understand Tax-Free Rental Income Limits
According to tax codes, you can rent out the vacation home for as many as 14 days every year and not pay any income taxes on your rental income. As long as you have not rented your home out for more than 14 days, you do not even need to report that income on your federal tax return for that year. You may be purchasing your oceanfront home for the purpose of enjoying it on your own, but the ability to make some tax-free income can be enticing.
Learn To Maximize Rental Income
The best way to maximize how much you earn during those 14 days is to rent out the property on days where activity is high. You can actually do this by looking at the rates of hotels that are close to your home. If they are charging more money due to a local event, spring break, or even just because it is tourist season, you can get away with renting your home for more money as well.
Advertise Your Home
You'll need to register your home with a website that lists vacation rental properties that are privately owned. These are a popular choice for potential renters that are visiting from out of town and looking for a place to stay that is not a traditional hotel.
For more tips on utilizing your home as a rental property, be sure to ask your real estate agent. They can give you advice about oceanfront property in the area you are looking into.