Is it your second home you are purchasing?
Buying a second is good news and it worth celebration. But do you know that you can actually reduce your tax allowance by this good news? You can learn how to tap into this tax rebate in this article. You can learn what the various tax deductions you can benefit from as you purchase your home.
Using a credit facility or a mortgage to finance your second home has its benefit. If you should use the place as a residing place for you rather than for rental, you can claim full mortgage interest as a tax deductible. However if you rent it out you can’t deduct the mortgage interest from the rental income. But if you use the house for at least 14-21 days in a year, the house is regarded as a residential home
Property tax is also deductible from your income when buying your
Do you want to rent the house out?
If you want to rent your home out at any point of the year without paying any tax on such income you can do so, as long as the renting does not exceed 14 days. No matter what you receive as income it can be pocketed by you. If it is more than 14 days, you would have to report such income. You can deduct expenses associated with the rent on schedule E. expenses like advertising, cleaning, maintenance, insurance, management fees, repairs, mortgage interest, taxes, utilities, and depreciation. If however, you decide to rent as well reside in the home, your expenses is prorated accordingly. For instance, if the property is rented out 80% of the time, your rental expenses on those rental incomes would be prorated.
Rental/ residential claim:
You can actually kill two birds with a stone. You can optimize your tax benefit by having your home rented for less than two weeks and get a tax break and keep the rental income. If it is more than two weeks, you will have to declare the rental income, however you will be able to claim some tax deductions because the home is regarded as a residential [since you will have to stay in the house for at least 2-3 weeks.] these allowable tax deductions are charged against the rental income. If there are more expenses than income, the loss is not carried forward to a new year. These are the tax deductibles;
- Mortgage interest
- Mortgage insurance
- Real estate taxes
- Supplies and miscellaneous expenses
In conclusion remember the following:
- If the property is not used, expenses are deductible against the rent
- If you rent the property less than fourteen days in a year, the rent you receive should not be reported in your tax returns
- If it is rented more than 14 days a year, your expenses are prorated against your income.
We have many more Credit Repair Articles Now Available.