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Vacations? It is the lifelong dream of every individual to pack their suitcases and explore what the Earth has held for them. And believe it or not, the excitement of a vacation doubles when you know your vacation home is just waiting for you. But beyond having a carefree and relaxing dive into nature, a vacation home comes with its own set of tax complications, especially when you have been deciding whether or not to rent it out.
Owning and renting a vacation home in 2024 is no easy feat, so before you catch yourself in any wanted tax casualties, let us dig into the guide below that can help you maximize your enjoyment and minimize your tax burden.
Depending on how you use your vacation home unlocks doors of tax benefits for you. Whether you decide to rent it out or keep it for yourself, that is totally up to you, but if you choose the former option, you better remember to give some of your profits to the IRS.
For more precise calculations, you must keep a record of both the rental income and expenses during your personal use.
Here is a list of deductible expenses that you can claim:
The value of your vacation home declines over time. But here is the catch, the IRS let’s you claim a portion of the expenses incurred over your vacation home. This significantly reduces your taxable income for the tax year.
Moreover, when you sell your vacation home, you will also be entitled to capital gains tax which you can claim at the time of the sale. These capital gains will also most likely reduce your overall tax liability.
If, for over two years or more out of five years, you have kept your vacation house for your personal use, you are eligible for a capital gains tax exclusion of up to $250,000 (if filing single) or $500,000 (if filing jointly); this benefit can only be availed if you decide to sell your vacation home.
A vacation home is indeed one of the blessings that not everyone can afford, but if you want to fully reap its benefits, understanding its tax implications is equally important. Remember, this article provides a general overview.
You must consult a tax advisor to better understand your current financial and tax situation. Dimovtax.com has an expert team of tax professionals who can guide you about your prospective tax benefits depending upon your specific circumstances.
Call us today at (833) 829-1120, email us at info@dimovtax.com, or fill out the form and we’ll get in touch immediately.
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Dimov Tax is rated 5 stars on all major review platforms including Google, Yelp, Facebook, Angie’s List, Better Business Bureau, TaxBuzz, Thumbtack, Upwork, Bark, and much more.