Perks of Owning a Second Residence
With the snowfall of the season that happened just last week, it’s fair to say that cold weather is beginning to spread through the northern United States. If you’re a year-round Floridian, you know this is the season where the snowbirds come down to reclaim their role as our neighbors, and if you’re a snowbird yourself, you’ll probably be making your way down to the sunny South any day now. Absentee homeowners make up a big part of the Florida community. If you’re a Northerner and are wondering if the snowbird lifestyle is for you, keep reading this blog for what it means and what you’ll get from owning a second residence.
Tax Benefits
Realtor.com highlights surprising benefits that come with owning a second home:
Mortgage Interest: “When it comes to owning a second home, the interest on your mortgage is deductible. In fact, you can write off as much as 100% of the interest you pay on up to $1 million of debt, which includes total debt taken on to pay for both homes, as well as money spent on improving the properties.”
Home Improvements: “You can deduct the interest on a home equity loan or line of credit. But there are a couple of exceptions. For starters, there will be a limit on the amount you can deduct if the home equity loan on your main or second home is more than $50,000 if filing single or $100,000 if married or filing jointly. Second, the amount you can deduct has a limit if the mortgage is more than the fair market value of the home.”
Property Taxes: “You can also deduct your second home's property taxes, which are based on the assessed value of the home. Unlike the mortgage interest tax deduction, there’s no dollar limit on the amount of real estate taxes that can be deducted on any number of homes owned by the taxpayer.”
When it’s Time to Sell: “You don't already know which of your homes is your primary residence and which is the second home—now's the time to figure it out. Distinguishing between the two can have big tax implications when it comes time to sell. That's because a capital gain of up to $250,000 (or $500,000 for taxpayers who are married/joint filers) on the sale of the principal residence may be excluded from taxable income. Your principal—or primary—residence is the home you used most during the five years prior to the sale. But other factors—such as your job's location, voter registration address, and banking location—could also come into play. Among other requirements, you must own and use that principal residence for at least two of the five years before the home is sold.”
Opportunities for Extra Income
With two residences, you’ll obviously be living in one home at a time, meaning you’ll now have the ability to rent out one of your residences. You can either rent it out the old fashioned way, or list your home on a website like Airbnb that’s popular among millenials and people looking for more homey, authentic lodging options. If you choose the former, check out this Investopedia article for tips on how to rent right. As for the Airbnb route, a popular website like that can be intimidating to tackle, but once you get the hang of it, it’s a great brand to be a part of. Here’s a step-by-step guide to teach you how to list your home on Airbnb.
Weather Upgrade
Having a residence in south Florida has one outstanding perk: sunny weather & a place to escape the cold. Check out one of our many city guide blogs that we’ve published in the past to get to know different areas. Also, we here at Collins & Company offer top-of-the-line services for absentee homeowners, from property management to property watch.