The Tax Benefits Of Buying A Vacation Home
The ownership of real estate often brings with it certain tax benefits, and a vacation home is no exception. In addition to deducting mortgage interest and property taxes, most owners of vacation homes are allowed to receive tax-free rental income.for a limited number of days. The amount of tax-free income can be strategically maximized by renting out a vacation home during periods of increased local housing demand.
An individual tax filer can deduct the mortgage interest on two homes, as long as the combined total for the two mortgages does not exceed $1 million. Property taxes on a vacation home are also tax-deductible. Although the deduction amounts for mortgage interest and property tax are relatively fixed, the potential for receiving tax-free rental income is subject to change from season to season.
Only 14 tax-free days
The tax code allows you to rent out your vacation home for up to 14 days each year without paying income tax on the rental income. The rental revenue received for those 14 days is not required to be reported on your tax return. Even if your primary intent in buying a vacation home is for the sake of enjoying the property itself, the prospect of tax-free income may be worth considering.
Area hotel comparisons
Look for special events that are held in the region where your vacation home.is located. In particular, identify events that result in increased rates at area hotels. You are more likely to receive a higher daily rental rate when area hotels are temporarily charging higher rates.
Many attendees at major events fly into a nearby airport before renting a car and driving to a hotel close to the event area. Other attendees may drive from distant states. The overall affect is to greatly reduce the number of hotel rooms available, thereby raising the market rates of other short-term rental properties. Rental rates at popular vacation destinations may also increase during holidays.
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You can check the online reservation websites of most franchise hotels in your area to see if a particular upcoming event is affecting room rates. Experienced travelers understand that hotels in high-demand areas often sell out rather quickly. Those travelers are also likely to use websites that feature properties for rent by owners.
The amenities of your vacation home are likely to be preferred over the basic amenities of a hotel room. Contact a real estate professional to receive information about vacation homes for sale.
