Does taking out a "second home" loan have different tax ramifications than taking out an "investment home" loan?

Asked by DB, Fort Lauderdale, FL Tue Jul 16, 2013

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Tony Grech, Mortgage Broker Or Lender, Southfield, MI
Tue Jul 16, 2013
Disclaimer: I'm no tax expert and you should verify this with a pro before you go doing anything!

Although mortgage terms and requirements are widely different for a 2nd/vacation home and an investment property, from a tax standpoint the loan you take out is irrelevant. It depends what you actually use the home for.

If you should decide to purchase another home at the beach or maybe the mountains, the vacation home would be your second home. If this home is for your use only, and If you are able to itemize your deductions for tax purposes, the mortgage interest from the second home can be used as a deduction.

In contrast, if you rent out the home for more than two weeks per year, the IRS will consider it an investment propery. In this case, you can only count expenses of the property against any income that is generated from the property. These expenses can help offset taxes you must pay on the income you receive from renting it out.
1 vote
Josh Barnett, Agent, Chandler, OK
Fri Jul 19, 2013
Real Estate Taxes, personal income taxes or capitol gain taxes?
0 votes
Thomas Moser, Agent, East Northport, NY
Tue Jul 16, 2013
I have heard that the federal govenment is considering eliminating the tax write off for investment property mortgage interest, so you may want to take that possibility into account.
0 votes
Daniel Dohrn, Agent, Lighthouse Point, FL
Tue Jul 16, 2013
Hi hwkeye05,
I have noticed that you have filed several real estate related questions on Trulia in the last couple of weeks.
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Dan Dohrn, Realtor, Keyes Real Estate
0 votes
Stephen McRo…, Mortgage Broker Or Lender, Tampa, FL
Tue Jul 16, 2013
If you want real life scenario questions answered, always consult a Mortgage Broker.

This is a No Brainer!!!

Absolutely it does!

Number one, Higher rate on investment property loans means more possible interest write off.

Also, you can't write off furnishings, upgrades, repairs, HOA dues, insurance, advertising, etc. on a true 2nd home that you're not doing seasonal rentals on. There's no P.A.L. Account on a 2nd home to lessen future cap gains.

0 votes
Gary Hitchco…, Agent, Coral Springs, FL
Tue Jul 16, 2013
I would ask a tax lawyer Kyle Hitchcock at Berkowitz,Pollack,Brandt
0 votes
Joan Lorberb…, Agent, Boca Raton, FL
Tue Jul 16, 2013
This is a question that should be posed to and answered by your own tax advisor -- your accountant or CPA.
0 votes
Typical female answer.... don't answer the question, just direct someone to the nearest professional. The reason why I posted here was to avoid the hassles of going to someone. Duh!
Flag Tue Jul 16, 2013
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