Purchasers of 2nd homes and rental properties don’t always factor the financial benefits into their purchase when weighing their buying decision.  Mortgage interest and taxes are standard deductions available to any second home owner, but what about the other deductions that may be available?  Before you proceed, the first question, is your second home or villa on Hilton Head classified as residential or rental?

The 14 day test – Hilton Head Vacation Properties

If you rent your vacation property less than 15 days per year and only use it yourself, you do not need to report the income to the IRS.  And as mentioned above, you still get the mortgage interest, real estate taxes and certain casualty loses.  If you rent it for more than 14 days per year and use it 14 days or more or 10% of the time it is rented(whichever is greater) then your expenses are deductible.  Keep track of your income and expenses because your expenses are only deductible up to the amount of income.  And once again mortgage interest and property taxes are deductible.

Vacation Home Deductions

The expenses in excess of the rental income, mortgage interest and taxes are deductible for properties that are rented more than 15 days and used less than 15 days.  If your AGI is under $100k and you actively manage your rental property, you are allowed to deduct up to $25,000 in losses against other income.  This is gradually phased out for those that have income over $100k and disappears over $150,000.  Of course, any losses not deductible may be carried forward and used against passive income.

Expenses that may be deductible can include:  mortgage interest, taxes, condo fee, electricity, insurances, community fee, phone, depreciation(structure, furniture and fixtures) and sewer and water.

Show me the Numbers

If you would like to review the expenses, potential deductions and income on a single spread sheet, let us know.  We will email to you a cost analysis Short Term Example, for any property you are researching.  This analysis is a snapshot of the ownership expenses and possible write offs.  We can even do this for any property that you are considering for second home or permanent residence.

Disclosure Statement so we do not overstep our area of expertise

The above information is not intended to serve as a representation that any property is an investment of any sort, or that you will derive any economic benefits from the ownership, sale or rental of the property. There is no mandatory rental program for any property.  All of the above information should be verified by your accountant, CPA or tax counsel and is subject to verification by all parties.  Thank you.