Taxpayer says:
Last year, my husband came into a little money. He bought a few acres in the middle of the state and put a motor home on it. He plans to build a cabin on it. Since it’s not a second home yet can we get any tax breaks on it?
Taxgirl says:
Who says it’s not a second home? It doesn’t have to be bricks and mortar to qualify. The IRS says that a second home can also be a condo, co-op, mobile home, RV, house trailer – even a boat if it has sleeping, cooking and toilet facilities. Even that darn yurt that my husband intends to build somewhere in the Poconos would qualify.
You can also deduct “qualified residence interest” on a mortgage secured by a second home. You do not have to use the home during the year. However, if you rent it out, you must also use it as a home for at least 14 days or 10% of the number of days you rent it in order to take the deduction for home mortgage interest. There are some restrictions on the amount of interest that’s deductible – so be sure and check with your tax professional for more details.
It’s important to note that, for purposes of the mortgage interest deduction, bare land does not count.
You’ll also be glad to know that real estate taxes paid on a second home are also generally deductible.
There are some additional tax concerns if you plan to rent out the property, including how to report rental income and restrictions on deductions for mortgage interest. If you’re planning to turn your property into a rental, definitely check with a tax professional first.
Finally, at the sale of the home, you will be subject to capital gains tax. There’s an exception if you convert the second home to your primary home – maybe that’s something that you’re looking at down the road. Then it will depend on how long you’ve been in the house. Doesn’t sound like you need to worry now, but just keep it in mind.
Good luck with your new second home!
Before you go: be sure to read my disclaimer. Remember, I’m a lawyer and we love disclaimers.
If you have a question, here’s how to Ask The Taxgirl.
Ya learn something every day I didn’t know what a yurt was until today. No folks yurt is not a typo (that what I thought at first)
Hi,
I currently pay for all the home related costs for a condo for my elderly mother as parental support such as the loan expense, homeowner’s association fees, property taxes, and usually any repairs that need to be done.
This home I have been treating as a second home on my tax return but not charging any rent. This home is in the same metropolitan area ie Phoenix though (within 60 miles) and was wondering if I am handling this correctly. If one of us moved beyond 60 miles, would this change anything?
Justin,
This brings to mind whether your mother has income other than social security? If not or if it is small (under $3500) she may in fact be your dependent and if you are single you may be able to use the Head of Household filing status.
Thanks, Rick for your input. Thankfully, my mother has a pension income that helps her pay for her bills and so exceeds that dependency support limitation. Plus I just got married.
If one purchases a new motorhome and claims it as a second home, can
depreciation be claimed on the RV?
Jean,
Only property taxes and mortgage interest can be taken on a residence.
Sorry, I am not sure I understood the answer. I have a similar situation:
1) I have a loan with a bank on a 10 acre tract in which I have made the folloing improvements: electricty, septic, a cement pad with a roof for my RV.
2) i have a loan on a Travel Trailer with sleeping quarters, bathroom, cooking facilities.
Can I deduct the mortgage interest of the land AND the RV interest as both make up my ” vacation home” .
I do not rent the proerty or use it for any kind of business.
Thanks!
Joe