Tax Deductions for Vacation Homes

Andi • September 12, 2022

Tax deductions for a second home vary greatly depending on how much you use the home and whether you rent it out.

A vacation home offers a break from the daily grind, but it can also offer a tax benefit. The tax law allows most owners to lower their taxable income by claiming tax deductions for vacation homes. What’s deductible depends on a number of factors, especially how often you visit and  whether you allow renters .

Note: if you itemize, you can write off the mortgage interest you pay on up to $750,000 of debt secured by both your first and second homes. This amount is $1 million if your mortgage loans are grandfathered (i.e., were in existence as of December 15, 2017).

Don’t limit your notion of a vacation home to a beach cottage or a mountain cabin. Even RVs and boats can count, as long as there are sleeping, cooking, and bathroom facilities. Tax deductions for vacation homes are complex, so consult a tax adviser.

Is Your Vacation Home a Vacation Home?

If you bought your vacation home exclusively for personal enjoyment, you can generally deduct your mortgage interest and  real estate taxes , as you would on a primary residence. Use  Schedule A  to take the deductions. However, your deduction for state and local taxes paid is capped at $10,000 for 2018 through 2025. And the total amount of the mortgages for your first home and vacation home cannot exceed the $650,000 or $1 million amounts mentioned above. 

The tax law even allows you to rent out your vacation home for up to 14 days a year without paying taxes on the rental income.

You might be able to deduct any uninsured casualty losses too, if the home is located within a presidentially declared disaster area, though you can’t write off rental-related expenses. (More on those below.) If the home is rented for more than 14 days, you must claim the income.

Now, if you own what you consider a vacation home but never visit it, or only rent it out, other tax rules apply. Without personal use, the law considers the home an investment or rental property. Time spent checking in on the house or making repairs doesn’t count as personal use.

Tax Deductions for Rental Owners

As an exclusive rental property, you can deduct numerous expenses including property taxes, insurance, mortgage interest, utilities, housekeeping, and repairs. Even towels and sheets can be deductible. Use  Schedule E . You can also write off depreciation, the value lost due to the wear and tear a home experiences over time.

Treat the rental property like a business, says Mark Steber, chief tax officer at Jackson Hewitt Tax Services. Keep detailed records and maintain a separate checking account. Figure you’ll spend a couple of hours a week, on average, over the course of the year managing the property.

To maximize deductions, you need to be actively involved in the rental property. That means performing such duties as approving new tenants and coming up with rental terms. You also need to own at least 10% of the property. See IRS Publication 527 for details.

If your adjusted gross income is below $100,000, you can deduct as much as $25,000 for rental losses — that is, the excess of your rental expenses over your rental receipts. The deduction gradually phases out between an adjusted gross income of $100,000 and $150,000. You can carry forward excess losses to future years or offset losses to offset gains when you sell.

Mixed Use of a Vacation Home

The tax picture gets more complicated when in the same year you make personal use of your vacation home and rent it out for more than 14 days. Remember, rental income is tax-free only if you rent for 14 days or fewer.

The key to maximizing tax deductions for vacation homes is keeping annual personal use of your second home to fewer than 15 days or 10% of the total rental days, whichever is greater. In that case the vacation home can be treated as a rental, meaning you get the same generous deductions. To avoid going over the 10% limit, essentially you shouldn’t use your vacation home more than one day for every 10 days you rent it.

Make personal use of your vacation home for more than 14 days (or more than 10% of the total rental days, if this is greater than 14 days), however, and your deductions may be limited. For example, suppose you rented your vacation home for 180 days last year. You could use the home for up to 18 days of personal use before your deductions would be limited.

If you exceed the maximum, some deductions are limited; those related to the rental of the property are again limited by the ratio of actual rental days to the total days of use.

Let’s say you have a vacation home you personally use for 25 days and rent for 75 days. That’s 100 total days of use, and it exceeds the greater of 14 days or 10% of the rental days.  Therefore, your deductions are going to be limited in total and will also have to be allocated to personal and rental use by the ratio of time you rented the house compared with the total use.

So you can only write off 75% of the expenses as rental expenses — 75 rental days divided by 100 total days of use works out to 75%. Some of the personal expenses, such as mortgage interest and real estate taxes, will still be deductible on Schedule A.

DONNA FUSCALDO

Donna Fuscaldo has written about personal finance for more than decade for Dow Jones Newswires, the Wall Street Journal, and Fox Business News. She’s currently a freelance writer with her own home office.

For more great articles like this go to: https://www.houselogic.com/

Join Us: First Time Homebuyer Class

By Andi Dyer • August 4, 2025
Join us and our guest Amy Baker to learn about first-time home buying on Tuesday, August 19th, at Goods Local Brews (2620 Northwest Ave.) at 6 pm. Buying your first home is an exciting milestone, and we’re here to help make the process simple and stress-free! Join us for our First-Time Home Buyer Seminar, where we’ll break down everything you need to know—from understanding mortgages and down payment assistance programs to navigating the home-buying process with confidence. Whether you’re just starting to explore your options or ready to take the next step, this seminar will provide expert insights and practical advice to help you make informed decisions on your journey to homeownership. Questions? Call/text: 360.734.6479 

Featured Property: 19379 MORTON RD, Burlington, WA

By Andi Dyer • August 4, 2025
So many possibilities with this 9.9-acre property in a prime location near I-5. The bright and airy rambler features an open floor plan and two primary suites, offering comfort and flexibility. Unique zoning allows for an RV park, and the property currently generates $50,000+ in part-time annual revenue through RV parking, camping, and a 2024 trailer that conveys with the sale and operates as a successful Airbnb rental. The land is beautifully landscaped with gardens, fruit trees, and lush, park-like scenery—creating a private sanctuary that feels far away yet remains close to amenities. Continue to grow the business, expand operations, or simply enjoy the peaceful setting while generating passive income. A rare opportunity!

Join the Race for the Underdogs!

By Andi Dyer • August 4, 2025
JOIN THE PACK THIS AUGUST Lace up those sneakers and leash up your sense of adventure— the very first Race for the Underdogs 5K is happening at stunning Lake Padden in Bellingham on Sunday, August 17 at 8:30 AM . This heartwarming event benefits the incredible work of Happy Tails Happy Homes (HTHH) , a Whatcom County nonprofit that gives second chances to the animals who need it most. 🐶 Who You're Racing For HTHH isn’t your typical rescue. We’re a volunteer-powered, foster-based organization with no shelter, no offices, and no paid staff —just a deep love for the underdogs. That means every dollar raised goes straight to the animals, many of whom arrive with medical or behavioral challenges. We believe every tail deserves a happy ending. 🏃‍♀️ About the Race This scenic 5K trail loop winds counterclockwise around Lake Padden on soft grass and wooded paths. Starting near the picnic shelter at the east entrance, the route is mostly flat with a few rolling hills and one short uphill stretch through the trees on the lake’s southwest side. It’s peaceful, pet-friendly, and just the right mix of nature and challenge. 📍 Getting There From I-5 Northbound (Seattle): Take Exit 246 (N. Lake Samish), head left at the stop sign, drive 2.5 miles to the East Lake Padden entrance, and follow the HTHH signs to the playground. From I-5 Southbound (Bellingham): Take Exit 252 (Samish Way), go left over the freeway, right onto Samish Way, and continue 2.5 miles to the second Lake Padden sign (East entrance). Turn right and follow signs to the playground area.

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Selling Steps 1-2: Finding a Realtor® & Comparing Services

By Andi Dyer • May 16, 2025
Step 1  Many homeowners start the selling process by looking at sites such as Realtor.com, Zillow, or Redfin to see what similar properties have recently sold for in their neighborhood to determine the current value of their home. That’s fine and understandable, but keep in mind: The sites aren’t 100% accurate as listings that were never listed in the NWMLS, or For Sale By Owners, will be missing. The information on the online sites is often out of date or not accurate as NWMLS. Therefore, a property might show that it’s still Active on Zillow, even though it sold 9 months prior. When professional appraisers conduct an appraisal, they only take into account homes that have sold in a particular neighborhood within the last 90 days. It’s not possible to sort the data by date on the online sites so it’s difficult to only look for properties that have sold within the last 90 days. Therefore, Step 1 to buying a home should be to interview REALTORS ® to represent you and ask them to provide you with a CMA (Comparable Market Analysis). Find a Realtor® How do you find a really good REALTOR®? Hopefully, you’ll contact us at 360-734-6479 or andi@andidyer.com so we can see if we would be a good fit. Remember, not all REALTORS® are right for all people. It would be best if you found someone who is not only great at his or her job, but someone you like and trust as you’re putting a big piece of your financial future in their hands. Ask friends and family for referrals. Contact those Realtors® and set up initial phone screenings with them. Notice how quickly each REALTOR® responds to your initial phone call or email. The REALTOR® should get back to you within 24 hours; if not, that’s a bad sign. This business moves fast, and deals can be lost if your REALTOR® doesn’t respond quickly on your behalf to showing requests, offers, inspection negotiations, etc. Initial Phone Screening During the initial phone screening, find out if the REALTOR® knows your neighborhood and if they’ve ever helped a client buy or sell property in your neighborhood. Ask about their experience. If your gut reaction says this person might be a good fit, ask them to do a CMA on your home and set up a time to meet with them in person. Be prepared for the REALTOR® to ask questions about your home, how much you owe on your mortgage and if any repairs are needed as they need this information to do an accurate CMA. Meet In Person and Review the CMA When you meet with the REALTOR® in person, ask them our Interview questions for hiring a REALTOR (see the next article we send). You will go over the CMA (Comparative Market Analysis) together and evaluate your competition. Ask them not only what they think your home is worth, but what the average days on market (i.e. the number of days from when your home goes on the market until you have an accepted contract) are in your area. If the REALTOR® doesn’t know this, move on. Ask them what they charge, how much the closing costs will be, and what approximately you’ll net if you sell your home for X price. Most importantly, be honest with each REALTOR®. If you need to sell your home for a certain amount of money or in a certain time frame, tell them. Only when REALTORS® have a complete picture can they come up with the best strategy to fit your situation. Lastly, trust your gut. Sign the paperwork Once you’ve picked a REALTOR®, expect to sign a Listing Agreement authorizing that REALTOR® to represent you. That starts the ball rolling to get your home on the market. Questions? Contact us at andi@andidyer(dot)com or 360-734-6479.

Selling Step 3: Understanding the Escrow Process

By Andi Dyer • May 16, 2025
STEP 3 THE ESCROW PROCESS

Selling Steps 4-5: Understanding Your Realtor's® Role & Homework for Sellers

By Andi Dyer • May 16, 2025
Step 4 What I Do For You Not all real estate practitioners are REALTOR®. The term REALTOR® is a registered trademark that identifies a real estate professional who is a member of the NATIONAL ASSOCIATION of REALTOR® and subscribes to its strict Code of Ethics. When looking at all the factors that an Agent influences, it’s easy to see how important it is to choose the right one for you. Navigate a complicated process Buying or selling a home usually requires disclosure forms, reports, mortgage documents, insurance policies, deeds, and multipage settlement statements. A knowledgeable expert will help you prepare the best deal and avoid delays or costly mistakes. Information and opinions REALTORS® can provide objective information on utilities, zoning, schools, and more. They’ll also be able to provide objective information about each property. A professional will be able to help you answer these two important questions: Will the property provide the environment I want for a home or investment? Second, will the property most likely have a good resale value when I am ready to sell? Negotiating skills There are many negotiating factors, including but not limited to price, financing, terms, date of possession, and including or exclusion of repairs, furnishings, or equipment. In addition, the purchase agreement should provide a period of time for you to complete appropriate inspections, and investigations of the property before you are bound to complete the purchase. Your Agent can advise you as to which investigations and inspections are recommended or required. Property marketing power Real estate doesn’t sell due to advertising alone. In fact, a large share of real estate sales comes as the result of a practitioner’s contacts through previous clients, referrals, friends, and family. When a property is marketed with the help of a REALTOR®, you do not have to allow strangers into your home. Your REALTOR® will generally prescreen and accompany qualified prospects through your property. Someone who speaks the language If you don’t know a CMA from a PUD, you can understand why it’s important to work with a professional who is immersed in the industry and knows the real estate language. Experience Most people buy and sell only a few homes in a lifetime, usually with quite a few years in between each purchase. Even if you have done it before, laws and regulations change. REALTORS®, on the other hand, handles hundreds of estate transactions over the course of their career. Having an expert on your side is critical. Objective voice A home often symbolizes the future, rest, and security – it’s not just four walls and a roof. Because of this, home buying and selling can be an emotional undertaking. And for most people, a home is the largest purchase they’ll ever make. Having a concerned, but objective, third party helps you stay focused on both the emotional and financial issues most important to you. Questions? Contact us at andi@andidyer(dot)com or 360-734-6479.

Selling Steps 6-7: Electronic Signatures & Exclusive Sale Agreements

By Andi Dyer • May 16, 2025
Step 6 Signing Electronically Authentisign is a secure, online, document signing service that enables multiple parties to participate and sign real estate documents electronically. Electronic signatures have been approved for use since June 30, 2000, when Congress enacted the Electronic Signatures in Global and National Commerce Act. In an electronic signing, the action of you approving the documents is your signature. Instead of actually signing your name, you are approving the documents by clicking on signature or initial blocks. When you click on each block, the document will replace the block with your name or initials. The entire signing process is tracked, including the IP (internet protocol) address of your computer and the date and time you signed. This electronic process is convenient, efficient, and reduces the amount of time and paper used in the transaction. Respond to Invitation You will receive an invitation email with a link to access the signing transaction. Click the blue icon (shown below) to open the Authentisign electronic signature service.

Selling Steps 8-11: Zillow Accuracy & Zestimates

By Andi Dyer • May 16, 2025
Step 8 You see a home on Zillow or the like (we’ll call them portals from here on out) and inquire about its availability with us…and it’s not for sale. You’re looking to sell your home and you LOVE the Zestimate (I don’t need to talk to anyone to find out how much my home is worth; squeeee! And even better my home magically increased in value by $50K in the last two weeks according to Zillow; double squeeee!), yet the number is completely wrong when you talk to a REALTOR®? Why? Let’s start with the availability of homes part. The dirty secret about online real estate is that it’s built upon you being a leader. The online real estate world is inaccurate and untrustworthy. Portals don’t care about their data being accurate; they are an advertising website, not a real estate website so there’s no incentive for them to make sure that a home that sold six months ago is changed from active to sold on their website. They just care about getting your contact information, they sell advertising. Now that you know that the baseline of portals is garbage, let’s move on to estimates of home value. First of all, Zillow itself calls it a “Zestimate,” as in estimate. Zillow has a helpful chart which can be seen below showing that in the Seattle area the Zestimates are off by 9.8% on average. That means on a $500,000 home the Zestimate could say it’s worth either $450,000 or $550,000. That’s a $100K swing in price. Instead, Zillow says it’s a starting point for a pricing discussion. If it’s not even close to accurate, why are you taking these estimates as gospel? Wouldn’t it be called a “Zaccurate” if it was accurate? So why they aren’t accurate and what are these Zestimates based on? In Whatcom County, most of their data come from public data derived from the county, city, and state. The problem with this data is that it is out of date, to begin with. Anyone who has lived in Whatcom County for any length of time knows that the data is often inaccurate and this, in part, is what Zestimates are based on. The portals do not have access to sold home prices – en masse – which adds another layer of inaccuracy to the mess. The portals then apply an algorithm – a computer program – to these disparate incorrect pieces of data to derive an estimate of value. How can an accurate price be determined for a home when the data it is based on is out of date and incorrect? It can’t. So how should the value of a home be determined if you want it to be accurate? Sold home data – hard dollars spent – in a recent time period on homes that compare to each other is the most important way to determine the current market value of your home. Appraisers only use comps that have sold within the last three months which have a similar number of bedrooms, baths, square footage, and features, and are located within a 1-mile radius of the subject property. This is the reason why the beautiful new construction 3-bedroom single-family home that sold a year ago on your street doesn’t help the value of your 100-year-old 2-bedroom four-flat condo. Only real estate professionals and appraisers have access to this sold data; portals do not. The condition of your home is a factor. All things being equal, an updated home will be of more value than an identical home in the bedroom, bath, and square footage count no matter how much you love your “charming!” 50-year-old kitchen and asbestos-filled basement. Whether a neighborhood is appreciating or depreciating in value will affect the price of your home. Often a Seller’s perceived value of their home and the actual market price are very different numbers. You might be willing to overlook that your home has no AC and that the third bedroom is the size of a storage closet because you think the home has a ton of character which makes it worth the same as a home with Central AC and three large bedrooms, but these issues affect the price whether a Seller wants to admit it or not. This is why determining the fair market value of a home is a mixture of art and NWMLS data. My job as a REALTOR® is to help you determine where the actual market price of your home is based on the accurate information we have at my disposal, not the perceived price based on your emotions. So, in lieu of talking to us or any other REALTORS®, where can you go for accurate information? We will send you a link, to my system that is accurate, and an app HomeSpotter which it is integrated with. See a house on Zillow, Trulia, etc. that you like? Look it up on my App or NWMLS to be sure it’s actually available. Our sites are updated constantly. Zillow’s website sometimes has information on it that is 6 months old. In a fast-moving market, this could make or break your buying experience – specifically how much time you waste online. You’ll need to find every home in your general area and neighborhood which matches your home’s bedroom, bath, square footage, parking, etc. which has sold in the last three months since that is the time frame appraisers use. Then you need to go inside of them (or find recent photos of the interior) to make sure they match your home in terms of quality, condition, and finishes to determine a somewhat accurate value. Or you can pay for an appraisal every year until you’re ready to sell. Or we can generate an NWMLS report of sold homes in your neighborhood for you whenever you’d like, which is free. One tip we do recommend for Sellers is to claim your home on Zillow so you can make the data as accurate as possible.  The bottom line for these and other websites is this: They are nothing, but advertising sites meant to monetize your eyeballs. Next time you log on to a portal such as Zillow and Trulia, look for an ad for a bank, or three-plus Agents (who pay to make it look like it is their listing which it isn’t), or a mortgage person or any of the myriad of advertising partners these companies have. Every time you look up a home as a Buyer or try to ascertain the value of a home as a Seller you’re selling an ad for these people and companies to the tune of multiple millions of dollars every year. They aren’t in the business of accuracy, only your eyes on an ad. Want accuracy? Want to know the market value of your home? Tired of wasting your time online? Give us a shout. Questions? Contact us at andi@andidyer(dot)com or 360-734-6479.
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