Tax Benefits of a Second or Vacation Home as a Primary Home vs. Rental

Updated on April 26, 2020
MarleneB profile image

Marlene is a California real estate broker/realtor who has been selling property since 1989.

Take advantage of second home tax deductions
Take advantage of second home tax deductions | Source

A Second Home Has Valuable Advantages

Owning a second home offers many advantages. Of course, one of the primary benefits is that you own a place where you and your family and friends can go and spend as much time as you like without the hassle of having to book a hotel or rental. Another benefit may be that you have a peaceful place to retire. It might also be an investment opportunity in the form of rent money. And finally, last but not least, you may be entitled to some tax benefits by owning a second home.

Second homes can be a great investment
Second homes can be a great investment | Source

How the IRS Defines a Home

Many types of structures can be considered a home. The Internal Revenue Service (IRS) identifies a home as a house, houseboat, mobile home, cooperative apartment, or condominium. As long as there are sleeping, cooking, and bathroom facilities, it can be classified as a home. If you are a homeowner, you already know about the tax advantages of owning your primary residence. Second homes can receive tax breaks from the IRS, as well.

Not all second homes are treated alike, however, so if you own or are planning to purchase a second home, you should definitely make sure you are aware of the basic tax rules that affect second homeowners.

If Your Second Home Is Your Vacation Home (You Don't Rent It Out)

If you use your second home for personal enjoyment, generally, your mortgage interest and real estate taxes can be deducted the same as you would on your primary residence.

Mortgage Interest

As a homeowner, you already know that the interest on your first home mortgage is deductible. If you use your second home as a secondary home where you live part of the time and you do not rent it out, then the interest on the mortgage on your second home is deductible, as well. You can write off 100% of the interest you pay on up to $1.1 million of debt secured by your first and second homes and used to acquire or improve your properties. Keep in mind that this deduction is for a total of $1.1 million of debt and not $1.1 million on each home.

Property Taxes

You can deduct property taxes on your second home. In fact, you can deduct property taxes paid on any number of homes you own.

If You Rent Out Your Second Home

The number of days you rent out your second home is important for determining the number of tax benefits you are eligible for. Basically, if you rent out your second home for less than 14 days a year, then you can treat your second home the same as you treat your primary residence. If you rent out your second home for more than 14 days a year, then the IRS determines that your second home is rental property, which is taxed differently than primary residences. Please note that if you never visit your second home it will be classified as an investment property. In order to be considered personal use of your property, you must use your home. The visits that you make checking in on your house or making repairs or maintenance does not count as personal use and will render your second house to be an investment house.

Rental Period Per Year = 14 or Fewer Days

If you rent out your second home for 14 or fewer days during the year, you can receive the funds tax-free. It doesn’t matter how much you charge for rent, you do not have to claim this amount to the IRS. If you rent out your second home for fewer than 14 days, the home is treated the same as your personal residence and you would deduct mortgage interest and property taxes the same as you would for your primary residence.

Rental Period Per Year = More Than 14 Days

If you rent out your second home for more than 14 days, then you must report all of the rental income that you receive. At the same time, you are able to deduct rental expenses including taxes, insurance, mortgage interest, utilities, housekeeping, and repairs. You can even deduct supplies such as towels and sheets. Moreover, you can write off depreciation, the value lost due to wear and tear of the home over time. The challenge is in determining where to allocate the costs between the time you used the property for personal purposes and the time you rented out the property. You want to keep excellent records of dates, income, and expenses. And, hire a tax professional to properly attribute taxable and nontaxable income.

The key to maximizing deductions is keeping yearly personal use of your vacation home to fewer than 15 days or 10% of the total rental days, whichever is greater. In that case, the vacation home can be treated as a rental, receiving rental deductions. To keep your second home considered a rental property, you must avoid going over the 10% limit. To help gauge the maximum amount of time you can use your home for personal use, basically, you should not use your second home more than one day for every 10 days you rent it.

In order to maximize rental property deductions, you need to be actively involved with the rental process. This means conducting meetings with the tenants and setting rental agreement terms for tenants. And, this is highly important—you need to own at least 10% of the property.

Converting Your Second Home Into Your Primary Residence

A tax advantage strategy that second homeowners use to avoid paying capital gains taxes upon the sale of a second home is to convert their second home into their primary residence. The way to do this is to live in the second home for two years out of the previous five years before selling the home. This qualifies the sale for an exclusion from taxes for a profit of up to $250,000 for single filers and $500,000 for joint filers.

For 2009 and later years, you pay regular 10% capital gains taxes on the portion of the gain that is equivalent to the time you used the home as a vacation home after 2008.

Computing Taxes Is Complicated

Your tax professional will need all the details of how you use your second home. This information must be consistently collected and maintained throughout the year in order for your tax professional to accurately compute your adjusted gross income and your modified adjusted gross income. Confusing? Indeed it is.

Turbo Tax Explains Rental Property Tax Deductions


The IRS has many publications to help you understand the basics of owning a second home and how taxes are applied to ownership. For more information about owning, using, and selling your second home and the tax pros and cons, go to and search for the following publications.

  • Publication #527 Residential Rental Property (Including Rental of Vacation Homes)
  • Publication #523 Selling Your Home

Please note: Every individual has a unique tax situation and while the information stated in this article is true, please use caution when relying on this and any information you read or hear about tax benefits. Before making any tax-related decision, please consult with a tax and/or legal professional for advice.

Time for Vacation

In what type of dwelling did you reside when you went on your most recent vacation?

See results

This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.


    0 of 8192 characters used
    Post Comment
    • MarleneB profile imageAUTHOR

      Marlene Bertrand 

      6 years ago from USA

      Yes, so right, Rajan. The anticipated tax is a significant thing to factor in when making the decision to buy a second home.

    • rajan jolly profile image

      Rajan Singh Jolly 

      6 years ago from From Mumbai, presently in Jalandhar, INDIA.

      Very informational read, Marlene. A second home is treated differently for tax purposes here as well depending on whether it is used for rental or household purposes.

      Voted up.

    • MarleneB profile imageAUTHOR

      Marlene Bertrand 

      7 years ago from USA

      Brett.Tesol - Owning a second home can be complicated. There is so much information to learned. Thank you for your comment and for sharing.

      bdegiulio - Owning one home is hard enough, owning a second home is a little more challenging, but worthwhile. Thank you for reading and for leaving a comment.

    • bdegiulio profile image

      Bill De Giulio 

      7 years ago from Massachusetts

      Very useful info. I don't own a second home but maybe someday, and this info will come in handy. Thanks

    • Brett.Tesol profile image

      Brett C 

      7 years ago from Asia

      Up and useful, it is always good if you can legitimately avoid paying high taxes. Property can be a tricky area, but your hub outlines the main points very well.

      Sharing this with my followers, who knows, maybe they can save some $$$s.

    • MarleneB profile imageAUTHOR

      Marlene Bertrand 

      8 years ago from USA

      Hi LauraGT! Thanks for visiting and commenting on my hub. Yes. The lottery. That will be my ticket to full retirement.

    • LauraGT profile image


      8 years ago from MA

      While I'm not lucky enough at the moment to have a second home, these are great tips for sometime in the hopeful future (I guess I should start buying lottery tickets now!) ;)


    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at:

    Show Details
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the or domains, for performance and efficiency reasons. (Privacy Policy)
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)
    ClickscoThis is a data management platform studying reader behavior (Privacy Policy)