Great tips from The Real Estate Journal regarding second homes and rentals. Worth a review, although I presume most people use a tax accountant, if they own an investment property, and don’t really need to know this, themselves.
One thing I didn’t know – you can rent out your primary residence for up to 14 days, and not owe any taxes on the income, at all. Who knew?
Q: I rent out my vacation house only a few days a year. Do I have to pay tax on my rental income?
A: There is a provision where you can rent your house, which a lot of people did for the 1996 Olympics in Atlanta, for two weeks or less a year and not have to pay any tax on the rental income. That’s what is sometimes referred to as the Masters provision. People along the Augusta National Golf Club, where the Masters Tournament takes place, rent their homes for fabulous amounts, but the tournament takes less than two weeks. People in this category can’t take any deductions against the income from their property for things like utilities and maintenance, but they don’t have to report any rental income. Some people make a lot of tax-free money each year renting their house for recurring events like the Masters.
The Real Estate Journal also has two other stories of interest: Tax Flubs Vacation-Home Owners Make When Selling Their Houses and Swapping Mixed-Use Properties: Can Capital Gains Be Deferred?
Source: Tackling Tax Questions About Vacation Homes – By Lauren Baier Kim, The Real Estate Journal