Second-Home Deductions

Some deductions are available if you own a second home. To qualify for a deduction, the second home must offer a place to sleep, a toilet, and cooking facilities, whether it be a condominium, recreational vehicle, or boat.

You may be able to deduct interest on a loan for a second home, provided your primary and secondary mortgages, including funds used to improve the homes, don't total more than $1 million. If you rent out the second home, you must use it personally for more than 14 days or more than 10% of the rental days, whichever is greater, for it to qualify as a personal residence. In addition to mortgage interest, you may be able to deduct property taxes and prorated monthly portions of your points paid over the life of the loan.

If you rent the home out for more than 14 days a year, you can also deduct the appropriate portion of upkeep, insurance, and utility costs. The property may be depreciated, which will help reduce your rental income without expending cash. These expenses are only allowed to the extent of rental income if the home qualifies as a personal residence. If you use the place yourself for not more than 14 days or 10% of the rental days, it's considered rental property and you can claim a rental loss (subject to certain limitations).

Finally, you can rent your secondary or primary home for less than 15 days without reporting the income! Rental expenses are not allowed.