Disclaimer: We are not tax professionals, and nothing in this post should be construed as tax advice. If you’re considering buying a second home in Grand Junction or elsewhere, please talk to your tax professional about the possible changes it will make in your tax situation.
This post is part two of a two-part series on the possible tax breaks of owning a second home in Grand Junction or elsewhere. Part one is here.
You can also deduct your second home’s property taxes, which are based on the assessed value of the home. Moreover, as opposed to the mortgage interest tax deduction, there are no limits on the dollar amount of real estate taxes that can be deducted on any number of homes owned by the taxpayer.
Becoming a Landlord
Here’s the good news for aspiring landlords: if you rent out your second home for 14 days or less over the course of a year, that rental income is tax-free—and there’s no limit to what you can charge per day or week with respects to the tax break.
Time to Sell?
So, you find yourself with a far-off hideaway that you’re lucky to visit a couple of times a year. Or on the other hand, your vacation home is just a quick drive away, and you spend every possible moment there. If it’s the latter is true, and you’re unsure which of your homes is your primary residence and which is the second home—now is the time to work that out.
Distinguishing between the two can have major tax implications when it comes time to sell. This is because a capital gain of up to $250,000 (or $500,000 for taxpayers who are married/joint filers) on the sale of the principal residence may be excluded from taxable income.
Your principal, or primary residence, is the home you occupied most frequently during the five years prior to the sale. But other factors such as your job’s location, voter registration address and banking location may also factor in. Among other requirements, you must own and use that principal residence for at least two of the five years before the home is sold.
Are You Buying a Home in Grand Junction?
If you’re thinking about buying a home in Grand Junction, Fruita or any of the surrounding communities, we’d love to help you.
Call us at 970-765-4135 or get in touch with us online to tell us what you want from your next house. We’ll help you find it.
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