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Buying a second home- Living the dream
It used to be that most people didn't buy a second home until they sold their first one. But times have changed and more and more people are realizing that it might make more sense than they had originally thought. There are a couple main reasons why people buy a second home, to get away from the day-to-day stress now or in some cases later, by saving it for retirement. And the other reason is the investment opportunities. Whatever your priority, be it peace of mind, or financial gain, or both, for that matter. Owning a second home may be the right choice for you and your family.
There are so many tax advantages, you may not be aware of all of them. You can write off 100% of the mortgage interest, and you can write off property taxes. New IRS rules allow for a capitol gain on the principal residence whenever people sell. Up to $250,000 for singles, and up to $500,000 for couples. Living in your second home for two years or more, entitles you for the same capitol gains break. If the return on your investment bears more than the bank interest will pay you, then you just made a smart investment.
Another thing to consider is that you have the option to rent in order to cover your second mortgage. You need to decide if you are going to declare it as a vacation home or rental property though, because the IRS has different rules for both. Also remember that if you declare it as a rental your mortgage could be slightly higher. So the benefits include tax breaks, a getaway for the family on vacations or holidays, a future retirement home, renters making your mortgage payments for you, or just a smart investment. On the downside, there is a second house payment, potentially higher mortgage if declared as rental property, and some hassle in upkeep involved. Just make sure to look at all your options and every angle to see if this is the right move to make for you.