Q&A on 2nd Homes?

Often I'm asked questions regarding 2nd homes and the tax treatment of certain deductions. I've put together 5 of the common questions individuals ask me when it comes to their main home and second homes. See below to see if this has been one of your questions...

Q-1) Can I write off the interest on my second home? A-1) Yes, there are additional limitations based on the amount of the mortgage, but generally speaking yes the interest is deductible.

Q-2) Can I write off the interest paid on a second for my home? A-2) If the the loan was "used to buy, build, or substantially improve your home" then the quick answer is yes, but again subject to limitations based on the amount of mortgage.

Q-3) I made improvements to my home this year, can I write those off? A-3) Unless the home is being sold or converted to a rental property or the improvements were energy efficient related, then no they are not deductible as an expense. However, do save the receipts for when you do sell the home! They could come in handy.

Q-4) I want to buy my first home this year and I've heard that I'll get a lot of money back, is that true? A-4) While it is true that having a home is a benefit for tax purposes, it doesn't ensure that you'll receive a refund. It will help to reduce the amount of taxes you would have to pay.

Q-5) If I convert my home to a rental property, will I need to pay capital gains when I go to sell it. A-5) That is a loaded question but to answer in brief, if you meet the rules for the primary residence exclusion ( to live in the residence as your primary residence for at least 2 years during the last 5 years & your gain is less than $250k single / $500k married joint ) then you wouldn't need to pay capital gains on the gain from the property but you will need to add to your income the amount of depreciation allowable on the property. If you still have questions or want to know more about any of these scenarios, please contact me using the information below.

---