Tax Breaks for Second-Home Owners
Rental income. You can rent your cabin for 14 or fewer days per year and pocket the cash tax-free.
Mortgage interest. If your getaway is a second home (not a business property), interest is deductible just as it is for your primary residence — you may write off 100% of the interest on up to $1.1 million of combined debt on the two houses.
Rental income. You can rent your cabin for 14 or fewer days per year and pocket the cash tax-free. You’re eligible for the exclusion even if you charge tourists thousands of dollars to sleep in your beds. Once you exceed 14 days, though, you must report all rental income.
Taxes on profits. The break that allows homeowners to take up to $250,000 of profit from a home sale tax-free ($500,000 for married couples) is restricted to the sale of a primary residence. But you can extend the tax break to cover part of the profit on a second home if you convert it to your primary residence at least two years before you sell. The portion of the profit that is tax-free is based on the ratio of time after 2008 that the house was a second home to the total time you owned it. Say you buy a vacation home this year, use it as a retreat for five years, and then move in and make it your principal residence. If you sell ten years later, two-thirds of the profit would be tax-free.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
-
Stocks Chop as the Unemployment Rate Jumps: Stock Market TodayNovember job growth was stronger than expected, but sharp losses in October and a rising unemployment rate are worrying market participants.
-
Should You Renew Your CD?With rate cuts impacting earnings, we examine if now is a wise time to renew CDs.
-
7 Ways to Plan Now to Save on Medicare IRMAA Surcharges LaterUnderstand the critical two-year lookback period and why aggressive planning before you enroll in Medicare is the most effective way to minimize IRMAA.
-
5 Types of Gifts the IRS Won’t Tax: Even If They’re BigGift Tax Several categories of gifts don’t count toward annual gift tax limits. Here's what you need to know.
-
The 'Scrooge' Strategy: How to Turn Your Old Junk Into a Tax DeductionTax Deductions We break down the IRS rules for non-cash charitable contributions. Plus, here's a handy checklist before you donate to charity this year.
-
Tax Refund Alert: House GOP Predicts 'Average' $1,000 Payouts in 2026Tax Refunds Here's how the IRS tax refund outlook for 2026 is changing and what steps you can take now to prepare.
-
New IRS Changes to FSA Contribution Limits for 2026: What to KnowHealth Care Flexible Spending Accounts have tax advantages worth looking into, especially in light of new IRS changes.
-
Is a New $25,000 Health Care Tax Deduction Coming in 2026?Tax Policy A proposal from GOP Sen. Josh Hawley adds to the chatter about health care affordability.
-
Are You Middle-Class? Here's the Most Tax-Friendly State for Your FamilyTax Tips We found the state with no income tax, low property tax bills and exemptions on groceries and medicine.
-
Social Security Benefits Quiz : Do You Know the IRS Tax Rules?Quiz Social Security benefits often come with confusing IRS tax rules that can trip up financially savvy retirees and near-retirees.
-
How Are I Bonds Taxed? 8 Common Situations to KnowBonds Series I U.S. savings bonds are a popular investment, but the federal income tax consequences are anything but straightforward.
