Are you thinking about buying a vacation home? If so, there are a few questions I’m sure you have. Fortunately, we have the answers, so that you can be fully prepared when you make the decision to buy a vacation home.
Can I rent out my vacation home?
Of course! You can rent out your vacation home to other visitors, but if you choose to rent out the property for 15 days or more during the year, this will significantly affect your taxes. Renting out your property is solely on your terms – you can choose the rental rates, set up guidelines, and so on. There are plenty of websites to market the rental on as well.
If you do choose to rent out your home and not seek out a property management company, keep in mind that taking care of the property on your own will come at a price. With your property constantly being exposed to excessive wear and tear, there will be maintenance issues and repairs that surface frequently. Making the repairs and arranging service calls can be time consuming and expensive.
How will a vacation home affect my taxes?
Just like with your primary house, a vacation home is going to have a big impact on your taxes. According to the National Association of Tax Professionals, property taxes and mortgage interest on first and second homes may be claimed as Schedule A deductions, but there are differences in the way vacation homes are taxed. Homes that are rented out for fewer than 15 days during the year are considered personal-use properties by the government. Owners do not have to report rental fees as income and there are no other deductions allowed. If you rent out the home for 15 days or more during the year, you will have a lot of additional paperwork, beginning with the rental receipts you will have to report to the government as income. All profits from the sale of a vacation home will be taxed as a capital gain.
Do I need to hire a rental property management company?
Many vacation homeowners seek out the expertise of a property management company to take care of the rental property. This company will handle renter interactions, marketing, collection of rental fees and all other parts of the rental process. Additionally, the company will provide routine maintenance services and arrangement for repairs. The owner will pay a fee for this service, a commission on rental fees or a combination of both, depending on the extent of the management services that are provided.