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 one of a two-part series on the possible tax breaks of owning a second home in Grand Junction or elsewhere. Part two is here.
When many prospective buyers picture owning a second home, they are usually thinking about one of two things: the relative novelty of having a place away from the daily routine to relax and unwind, or the convenient passive income source that a solid rental property might provide while also serving as an additional long-term investment. The most overlooked benefit, however, are the compounded tax breaks associated with owning a second property.
If you are in fact in the market for a second home, then you are most certainly aware of the annual tax deductions you are afforded as a home owner. Now, consider that you own two, or three properties—the savings only grows! Here’s how:
Compound Mortgage Interest
When it comes to writing off your mortgage interest, the rules for taking a deduction remain the same for an additional home. In fact, you may write off as much as 100 percent of the interest you pay on up to $1 million of debt, which includes total debt taken on to pay for both homes, as well as any money spent on the property’s improvement.
You may discover that the best way to enter the world of multiple homeownership is with the purchase of a “fixer-upper.” Should this be the case, and you choose to spend the off season making improvements to your new getaway destination, you may consider the fact that you can deduct the interest on a home equity loan or line of credit.
There are, however, a couple of exceptions. First off, there will be a limit on the amount you can deduct if the home equity loan on your main or second home is more than $50,000 if filing single, or $100,000 if married or filing jointly. Second, the amount you can deduct has a limit if the mortgage is more than the fair market value of the home.
Stay tuned; we have more possible tax breaks listed in Part Two of this article!
Are You Buying a Home in Grand Junction?
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