There are many for whom real estate taxes—or “property taxes”—are of interest. Whether it’s for a main home, a vacation home, or land owned, this property can become a deduction based on its value.
Although it’s never assured that this will yield a deduction, seeing as tax reforms have changed the climate of this and many taxes, it’s still worth the initial talk with an accountant. Below are some of the IRS’s most frequently asked questions pertaining to real estate taxes.
Is the Mortgage Interest I Pay on a Second Residence Deductible?
The IRS’s response is “yes and maybe.” As a general rule, state and local property taxes are deductible, and mortgage interest on a second residence should therefore also be deductible—so long as the residence wasn’t rented during the tax year. Presuming that you are renting the second residence, it must be used for more than two full weeks, or over 10 percent of the number of days it is being rented out.
Is Interest on a Home Equity Line of Credit Deductible as a Second Mortgage?
Interest that is paid on home equity loans and credit lines is not deductible—not unless these proceeds are used to buy or improve the taxpayer’s home. If, let’s say, the interest is used to build on an addition to an existing residence, it can therefore be deductible.
If you have other questions regarding real estate taxes, visit the IRS website.
We excel in assisting clients with general financial help, such as by analyzing accounts receivable, accounts payable, and competitors in your market. For more information about the specifics of taxes in real estate, contact Atherton & Associates, LLP.
