Do You know the Tax Difference in Second Homes?

Many folks who live in the valley have 2nd homes in the mountains. Some are fishing cabins while others are condos for ski weekends, or you might find a true replacement residence. The truth is that some of the tax law changes form last year might affect those home owners. So read on…

A principal residence and a second home have some similar benefits, but they have some key tax differences. A principal residence is the primary home where you live and a second home is used mainly for personal enjoyment while limiting possible rental activity to a maximum of 14 days per year.

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Under the 2017 Tax Cuts and Jobs Act, the Mortgage Interest Deduction allows a taxpayer to deduct the qualified interest on a principal residence and a second home. The interest is reduced from a maximum of $1,000,000 combined acquisition debt to a maximum of $750,000 combined acquisition debt for both the first and second homes.

Property taxes on first and second homes are deductible but limited to a combined maximum of $10,000 together with other state and local taxes paid.

The gain on a principal residence retained the exclusion of $250,000/$500,000 for single/married taxpayers meeting the requirements. Unchanged by the new tax law, the gains on second homes must be recognized when sold or disposed.

Tax-deferred exchanges are not allowed for property used for personal purposes such as second homes. Gain on second homes owned for more than 12 months is taxed at the lower long-term capital gains rate.

This article is intended for informational purposes. Advice from a tax professional for your specific situation should be obtained prior to making a decision that can have tax implications.

I would love the opportunity to assist you in connecting with a tax professional!  Call or email me today 480.355.8645 OR [email protected]


About the Author

Gina is an Associate Broker with RE/MAX Fine Properties and the Team Leader for The Gina McKinley Group. She is dedicated to selling homes in Arizona and passionate about providing the ultimate customer service experience through her expertise in the field. Gina received her real estate license in 1998 and has worked hard to service her clients by obtaining the designations and special education of Certified Distressed Property Expert, Certified Residential Specialist, Accredited Buyers Representative, Certified Investor Agent Specialist, and the Short Sale & Foreclosure Resource Specialist. She has been recognized by RE/MAX International with the prestigious Life Time Achievement Award, the highest level awarded by RE/MAX. Gina has also been named "Top 1%" in the State of Arizona by Real Trends. Gina's real estate, marketing and business knowledge, experience, and contacts ensure that you will receive a world class customer experience when you work with the The Gina McKinley Group to help you buy your new home, an investment home, handle your property management or sell your current one.

Gina's personal time is spent with her family, Dan, Jeffrey, & Kristin. She is passionate about giving back to the community, serves on a housing council, and works in various fund raising activities for autism. Her hobbies include travel, fitness, gardening, and outdoor activities such as hiking, equestrian, and golf.