Vacationing halfway around the world can be extremely fun, but the expense of renting out a vacation home for a week or two are definitely not. If you’re a fan of vacationing a little bit closer to home and looking for a financially smart purchase, a new vacation home could be what you’ve been waiting for. Here are just a few excellent financial benefits that will come with your purchase.
New Tax Deductions
A home might be expensive, but it’s also your biggest tax break. And a second home, even if it’s a vacation home, actually qualifies for those same tax benefits. Spending a mere 14 days annually in your vacation residence means you get to deduct the mortgage interest on it just like you would at your permanent residence.
The same benefits apply even if your home is in another country. Of course there’s more paperwork involved, but the tax deductions are certainly worth a small bit of hassle.
Not planning on using your new house all year round? Consider renting it out to families or groups of friends looking for a vacation rental without having to sit through the mortgage planning of buying a new home themselves. If you’re renting out this new residence for more than 15 days out of the year, you’re required to report the rental income on your income taxes for the year. While these do qualify for an interest deduction, it’s important that you keep close track of how often you’re renting out the property.
Reduce Retirement Expenses
Almost 32% of people looking to buy homes are first time home buyers, but not those who are planning exclusively for retirement. That being said, the earlier you prepare, the better! Purchasing a vacation home with the intent of making it a permanent residence after retirement is a great idea, but only if you plan ahead. By planning ahead, you’re reducing mortgage debt on your current home and on your vacation residence. When you decide to move, the profit from your home sale could actually pay off both mortgages.
Whether you’re looking for a vacation place with a conventional mortgage or not, these financial benefits certainly give you something to consider for the future.