Far West Realty - Rentals and Propery Management in Prescott
 

Comparing Rental Homes versus Second Homes

comparing the idea of a second home versus rental home in Prescott - Far West Property ManagementIf you’re lucky enough to have more than one home, either from the family estate or an investment property, you should consider the benefits of turning it into a rental property. When it comes tax time, how you use and define your second property could make a big difference in your taxes. Far West Realty, your Prescott area property management professionals, brings you these suggestions as we near the end of this year’s tax season.

  • First, you need to know the differences
  • Second Home - If you make no attempt to rent out a property and use it exclusively for your own personal benefit, IRS may view it as a second home.
  • Rental Property - If you never live or even vacation in a property, but hold it for investment purposes, IRS may view it as a rental home.
  • Mixed usage - In many cases, the owners of a second property may use it as both a second place to stay and one to rent out occasionally.

When it comes tax time, if you have only considered your property as a second home, you may be eligible for certain benefits pertaining to property taxes, and you should speak with a tax accountant about possible pros and cons of mortgage interest and home equity loan interest deductions, the IRS cap of $1 Million in mortgage debt and $100,000 interest inequity interest, which may apply to the total of both, not just each individual property.

Renting out your second home may also have certain benefits

If you rent out your second property for more than 14 days a year, you may be able to claim it as a rental property. All interest incurred may be deductible, as well as expenses that relate to the property, including things like maintenance. Your tax accountant may find that you must only pay taxes on the profit (the difference between your income from the property and the expenses of the property). If you lose money on the home, you might then be able to use that loss to offset income from other investment real estate properties or claim up to $25,000 of the loss against other income. There are several stipulations in the tax laws.

If you choose to use your second home as both, you can probably allocate it based on your usage.  For example, if you use it 25% second home and 75% rental house, you might still be able to deduct 75% of the rental expenses. However, if you report it as dual usage, losses may not be able to claim them. We re-emphasize, however, that you should talk with your tax professional for additional information on your specific case.

We hope that you have found this information helpful if you are thinking about buying a second home for either personal use or rental income. There are several things to consider if you plan on becoming an investment property owner, we suggest talking to your local Prescott property management professionals at Far West Realty. We can help you through the process and help ensure that you are making the best decision for your needs. Contact us today at 928-772-9400.

 

Posted to: Far West Realty’s Property Management Division

 

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Far West Realty in Prescott AZ - Homes for Sale | Buy Land | Property Management
5 out of 5 stars We have very much enjoyed our apartment as renters with Far West Realty for several years now, and are happily satisfied in our dealings with Dave Hamill and his staff. The very few concerns or problems we have had with our unit have always been met with real consideration and responsiveness. Further, Dave and his staff are readily accessible and always courteous. Tammy and Jim
Far West Realty in Prescott AZ - Homes for Sale | Buy Land | Property Management
5 out of 5 stars Working with Far West has been a pleasure. Dave and his office were responsive to questions and needs throughout my three years leasing from them.
Far West Realty in Prescott AZ - Homes for Sale | Buy Land | Property Management
5 out of 5 stars Dave Hamill at Far West Realty was my property manager on a single family house for several years. As an out-of-state owner, I relied on Dave for everything: tenant selection, lease negotiation, recovery when a former tenant didn't pay the last month's rent, cleaning, maintenance, marketing, managing repair work, etc. Dave and his team were always professional, courteous, competent, and just nice people. I wholeheartedly recommend them!
Far West Realty in Prescott AZ - Homes for Sale | Buy Land | Property Management
5 out of 5 stars I have been using Far West to manage my rental in Prescott Valley for approximately 7 years. I live out of the area know that things are being taken care of. I have complete faith in Dave and his team in the oversight of my property. They are thorough and very prompt in any given situation. I love the fact that I know that the house is being taken care of with TLC. You can't put a price on piece of mind and that is exactly how I benefit from using them. I would strongly recommend using Far West for your management needs. You will not be disappointed.