There are a variety of local, state and federal tax implications related to the purchase, sale and rental of vacation home properties. One of our professionals from Vacation Home Finders will be happy to help you identify some of the potential tax issues that you may be facing, and refer you to a tax expert. It is important to note, you should ALWAYS consult competent tax counsel whenever contemplating a real estate transaction!

There are federal income tax implications related to the purchase, sale and rental of vacation homes. The most common ramification is that, generally, interest payments and property tax payments are tax deductible. The tax benefits can even be greater if the vacation home owner rents out the property to a degree where other operating expenses are deductible (i.e. utilities, depreciation, maintenance and repairs) , because the property is treated as an investment. In such instances, however, the rental income is taxable. One small tax break, though, is that an owner can rent their vacation home for up to 14 days in certain circumstances and the rental income from those rental days is not taxable.

There are also federal income tax consequences at the time of purchase and sale of a vacation home. Generally, the acquisition and disposition of vacation homes are treated the same way as primary residences. Special tax rules do apply, however, for certain treatment of second homes, as well as:

1. when a seller is over 55,
2. the vacation home is sold and it was treated as an investment property, and
3. the vacation home becomes a primary residence at a later date.

Once again, consult a tax advisor for definitive advice.