If you have a second home, you should know about mortgage interest deduction second home tax breaks. When you have two homes, the IRS allows you to deduct rental expenses, taxes, casualty losses, house renovation costs etc from your annual tax payments. This deduction will allow you to reduce the amount of tax that you have to pay on the rental income that you are getting from the second home. There are a few other interesting quirks to this rule that you should know about though.
What makes up your mortgage interest deduction second home perks?
The mortgage interest on your second home is deductible as long as the loan amounts you have taken on the primary and vacation home do not exceed $1 million. Houses that qualify for this deduction should be the primary residence of the home owner or should not be rented out at all. If they are not rented, they should be occupied by the owner for greater than 14 days showing that the house is used for personal reasons. As a result, the occupation of both houses, you can easily deduct property taxes, maintenance costs, as well as mortgage rates from the taxes that are payable on both houses. The IRS is quite strict on who can stay in the home for it to be deducted. For example, only you or a member of your family or even people living in the house for free can be considered as personal residents of the house. The IRS also changes rules and regulations regarding mortgages regularly. We suggest you check with the IRS site for the latest rules and regulations about mortgage interest deduction second home changes and any other deductions that you can combine to get a good deal.
Recent News: The Obama Administration is planning to do away with this perk completely. This deduction costs the government thousands of dollars in lost property tax payments. Removing this deduction could also cause property rates to fall opening up the market for more investors. Romney seems to have plans to eliminate this mortgage interest deduction second home so that he can meet his individual tax rates cut of 20%. However, this rule has not yet come into force.