Owning a home is likely the most important investment you’ll ever make. And buying a second home may well be the second. With low interest rates, an abundant inventory, and a housing market poised for a strong rebound, there’s never been a better time to buy a Myrtle Beach area condo for sale whether purely for personal use or as an investment opportunity. But since each offers different tax advantages, it’s important to understand them before you buy.
If you use your vacation condo for more than two weeks or for more than 10 percent of the time for which it is rented, the IRS considers the condo a personal residence. The mortgage interest you pay is all tax-deductible, just as it is on your first home. And you can write off the interest paid on home equity loans of up to $1.1 million secured by your first or second home and used to improve the properties.
If you rent for more than two weeks, though, the IRS considers it a business and you must report all rental income, but can deduct rental expenses, including maintenance. This can be a little complicated since you need to allocate expenses between personal and rental use. Having the property considered a business offers a number of flexible tax advantages that can be complicated. That’s why working with a Realtor who understands the advantages and disadvantages of both can be very important.
If you rent your condo for 14 or fewer days during the year, you don’t have to worry about tax considerations at all but can pocket the cash tax-free. Even if you’re charging $10,000 a week, the IRS doesn’t want to hear about it. The house is considered a personal residence, so you deduct mortgage interest and property taxes just as you do for your principal home.