Second Homes and Vacation Homes as effective
Tax Shelters!

Second Homes are Effect Tax Shelters

Many people own more than one residence.  If you own a second
home, interest paid on loans secured by your mortgage for the
second home qualify for home mortgage interest deductions.  Real
estate tax deductions also apply.  When used properly, a second
home can be an effective tax shelter.

Second Home Definition
What is a second home you ask?  Simple, it's a residence that
includes a house, condominium, mobile home, boat, or house
trailer that contains sleeping space, a toilet, and cooking facilities.
This definition allows the interest expense to be deductible for a
yacht or motor home if the taxpayer chooses to treat the yacht or
motor home as a dwelling unit. 

Learn about the REQUIREMENTS for second homes and
see examples here

Do You Own More than Two Residences?
If you own more than two residences, you must designate which
residence is to be treated as your second home.  The IRS has a
two residence limit for deducting interest.  The interest on
mortgages on any additional home is nondeductible personal
interest.  When you own more than two residences you can change
how you treat a second home during the year in the following
situations:
 
  1. If you get a new home during the year, you can choose to treat
    the new home as your second home as of the day you buy it.
  2. If your main home no longer qualified as your main home, you
    can choose to treat it as your second home as of the day you
    stop using it as your main home.
  3. If your second home is sold during the year or becomes your
    main home, you can choose a new second home as of the day
    you sell the old one or begin using it as your main home.

You may treat a residence under construction as a qualified
residence for up to 24 months.  You can do this only if the residence
becomes a "qualified" residence at the time the residence is ready
for occupancy.  This is an exception to the rule that the property
must be used by the taxpayer as a residence.  If the construction
takes more than 24 months to complete, the interest after the 24th
month and before occupancy is not deductible.

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