Question: I’m about to buy a lake house as a second home. I plan to go there a few times a month but not live there full-time, and I don’t plan to rent it out. Is the mortgage interest tax-deductible?
Answer:
Yes. As long as you don’t rent out a second home for more than 14 days each year, you can deduct the mortgage interest you pay on it. But your deduction is capped at the interest you pay on up to $1 million of debt on your first and second homes combined. You can also deduct property taxes on your first and second home. All of these deductions are only available if you itemize.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
If you change your mind about renting the lake house to others, you’ll still be able to deduct the mortgage interest as long as you don’t lease it out for more than two weeks a year. And any rental income you receive will be tax-free, too, if you stay within the two-week limit.
If you rent out the house for longer than that, you’ll have to report the rental income to the IRS. But you can still deduct some of the mortgage interest and rental expenses, such as insurance and utilities, for the portion of the time that you rent out the house. Calculating the deduction gets complicated because you’ll need to determine how much of those costs should be allocated to when you were leasing out the house and when you were personally using it.
For more information about deducting mortgage interest on second homes and the rules for deducting rental expenses, see Tax Planning for Owning a Second Home and Buying a Vacation Home. Also see IRS Publication 530, Tax Information for Homeowners.
-
Stock Market Today: Markets Waver as Inflation Continues to EaseStocks gave up early gains as waning consumer price inflation leaves rate-cut bets essentially unchanged.
-
October CPI Report Hits the Mark: What the Experts Are Saying About InflationCPI While the current pace of rising prices appears to have leveled off, the expected path of rate cuts has become less certain.
-
Two Consequential Tax Cases You May Not Have Heard AboutThe Supreme Court's decisions in these cases create uncertainty about challenging IRS regulations and guidance. Expect more litigation to follow.
-
Sometimes It Pays to 'Blow the Whistle' on IRS Tax EvadersTax Fraud The IRS recently awarded three IRS whistleblowers $74 million. Here's why.
-
The Big CPA Shortage Problem in AccountingCareer This once resilient accounting industry is cracking, as the labor force seems in dire straits. It’s also affecting the IRS.
-
Before Buying Your First Home, Get These Three Ducks in a RowWith mortgage rates higher than we're used to, making sure you can comfortably afford to buy your first home is more important than ever.
-
IRS Skirts TikTok Ban to Sniff Out Tax ScammersTax Scams Social media scams caused thousands to file inaccurate returns. What does that have to do with TikTok?
-
Who Does the IRS Audit the Most?Audits The IRS has a $400K audit directive problem. Here’s what you need to know.
-
IRS Hauls Back $1.3 Billion From High-Income EarnersTax Filing Certain income and wealth levels can trigger an IRS audit. Here's what you need to know.
-
Incorrect ERC? IRS Points to Five New Red FlagsTax Credits These signs could mean there’s an error in your Employee Retention Credit claim.
