Vacation Home Can Offer A Tax Break
The first step, for those thinking of purchasing a vacation residence, is to review your debt history on your primary residence if you plan to borrow against it and deduct the mortgage interest on your federal tax return. Under the mortgage-interest guidelines, taxpayers are limited to the original acquisition debt, plus $100,000.
You can deduct the loan fees (”points”) paid to buy or improve your main home in the year of purchase. You cannot deduct these fees in the year you refinanced if you refinanced only to obtain a lower interest rate on your loan.
The tax rules and deductions for second-home owners who rent out their properties on a short-term basis depend on many factors, including how often you personally use your second home, how many nights or a percentage of the nights you rent out your home, and your personal adjusted gross incom.
