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Second Home Ownership

A home purchased by a taxpayer who already owns a primary home should be eligible for tax benefits from the ownership of the second home. The total mortgage balances of the two residences cannot exceed $1 million.  You should have less than$100,000 of home equity indebtedness as well.  The mortgage interest is generally fully deductible under these circumstances.

You must personally reside in the second property under one of the following two circumstances:

• If it is not rented, you must occupy the second residence for 15 or more days annually.
• If you rent it, you must occupy the second residence for more than 10 percent of the number of days it is rented. Deductions are limited if the home is rented a portion of the year.

The deduction for real-estate taxes will not be limited, whether the home is classified as a second residence, vacation-home rental or investment property.

You may also be able to deduct some expenses.