Tax Breaks for Vacation Homes

Just like your main home, your vacation or second home can have considerable costs – mortgage payments, taxes, and so forth. Good news: Many of the same tax breaks you can get for your primary home are also available for a vacation home. 

Mortgage Interest Deduction 

If you’re paying a mortgage on a vacation home, you could qualify for the mortgage interest deduction. If you don’t rent out the home, you may claim the home as a qualified second home and take the deduction. If you do rent out your vacation home, you must use either the home more than 15 days a year or more than 10% of the number of days the home is rented to claim the deduction. 

Note:  There are different maximum loan amounts rules, depending on the loan date: 

• For loans secured before December 15, 2017, you may deduct the interest if the combined mortgages, for either one or two homes, is $1,000,000 or less. If Married Filing Separately, the maximum home debt is $500,000. 

• For loans secured on or after December 15, 2017, the maximum is $750,000 ($375,000 for Married Filing Separately). 

Real Estate Tax 

You may also be able to deduct any real estate taxes assessed on your vacation home. If the taxes are included in mortgage payments, then your mortgage holder should send you Form 1098 with the amount of taxes paid. 

Note: Real estate tax is deductible, but the total of all state and local taxes is limited to $10,000 ($5,000 if Married Filing Separately. Included in this total are state and local income taxes, real property taxes, and personal property taxes. 

Vacation Home as Rental 

If you rent out your vacation home, you must use either the home more than 14 days a year or more than 10% of the number of days the home is rented to claim the deduction—but additional rules may apply. Any rental expenses are also deductible. See Renting Part or All of Your Home. 

Points 

Just like with a main home, points paid for a mortgage on a vacation home are deductible. But unlike with your main home, you cannot deduct the points all at once – you can only deduct over the term of the loan. 

Home Equity Loans 

For tax years 2018 through 2025, if you secured a home equity loan or line of credit by using your main home or second home, and the money was used to buy, build, or improve the residence, interest paid on the borrowed money may be deductible, subject to certain dollar limitations. Interest on the same debt used to pay personal living expenses, such as credit card debts, is not deductible.  

If you secure a home equity loan with a vacation home, you could deduct interest paid on the loan. You may deduct the interest if the loan does not exceed $100,000 or $50,000, if Married Filing Separately. 

Also see: 
Tax Breaks for Homeowners 
Disaster, Casualty, and Theft Loss 
Residential Energy Credits