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Your second home..Investment or Personal Property » fliprent
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  • Your second home..Investment or Personal Property

26th March 2008

Your second home..Investment or Personal Property

As a real estate investor you need to be well versed in tax laws.  Well at least if you are not well versed, youde better have a good tax accountant.   Tax deductions are available on your rental properties and also for your house flips.  The tax laws are fairly straight forward when renting property.  Typically maintenance and depreciation are the main deductions.   What about those of you that own second homes for vacation getaways or just another place to go fishing on the weekends?  This is where the tax laws get a little trickier.  The IRS classifies additional homes as either Investment property or Personal property. 

 Investment Property is generally classified as property that is not your “main residence”, and is rented for more than 14 days in a given tax year.  Personal property on the other hand is a home that you live in for more than 14 days in a year.    This means that if you rent your property for less than 14 days in a year and you also live in it for more than 14 days per year, the mortgage interest may be tax deductible.  According to realestatejournal.com, mortgage interest deductions up to the first 1 million dollars are available for real estate classified as personal property.  

In either case, selling your additonal property may be subject to capital gains tax.  The sale may require a minimum of 15 percent of the sold price be paid to Uncle Sam.  According to IRS publication 523, your main home is considered as the one you live in “most of the time”.  Several other factors are taken into consideration such as, where your bills are sent, where you buy your groceries, where you work out, where you vote, etc.  Always, consult your tax accountant for more information on deductions for businesses and real estate.     

This entry was posted on Wednesday, March 26th, 2008 at 1:18 pm and is filed under Real Estate Investing, Renting, Taxes. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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